Personal Pension  

Govt: 230,000 people raid pensions in first freedoms year

Govt: 230,000 people raid pensions in first freedoms year

Over 230,000 people have used the pension freedoms since their inception one year ago, according to government data released today (27 April).

Official figures obtained by FTAdviser put the number of people crystallising defined contribution pensions each year - and so since last April have had the option to take flexible withdrawals rather than buy annuities - at 350,000.

In total since last April those eligible have rushed to withdraw £4.3bn from their pensions in the first year they were allowed.

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The pension freedoms were introduced one year ago but were announced in the March Budget 2014.

At that time, Chancellor George Osborne changed the face of the annuities market by stripping away all caps and limits on drawdown.

In the most recent quarter, 74,000 individuals withdrew £820m. In the previous quarter, 67,000 individuals withdrew £800m.

Additionally, the government announced Pension Wise has had over 2.2m website visits and nearly 55,000 appointments to date.

The economic secretary to the Treasury, Harriett Baldwin said: “It’s only right people should have a choice over what they do with their money and in their first year our successful pension freedoms have already given thousands of people access and responsibility over their hard-earned savings.

“We will continue to make sure that the pension freedoms work well for everyone, including through working with our partners to ensure consumers are protected and that there is simple information to help people understand their options.”

Richard Parkin, head of pensions at Fidelity International said: “The anniversary of pension freedoms is an opportune moment to step back and look at the choices people have made.

“Much like HMRC figures show, our experience also demonstrates that taking retirement savings as cash has been a popular choice over the first year of the pension freedoms.

“The challenge we are now facing is how retirees should manage this lump sum while also making their monies last. Paying off debts or establishing a rainy day fund if you didn’t previously have one seems eminently sensible but we would urge retirees to think about the longer term plan of what they want to do with their monies.

“Happily, many will enjoy 30 years in retirement so careful thought needs to go into getting the most from their retirement savings.”

Daren O’Brien, director at London-based Aurora Financial Solutions said: “The real evidence of the cash taken out through Pension freedoms will only be known in 10 to 15 years time.

“This will be when these people run out of Income, but by then it will be too late for them to do anything about it.”