The amount of cash withdrawn using pension freedoms has seen its biggest jump since the reforms were introduced, with more than £2bn being accessed.
HM Revenue & Customs (HMRC) today (31 July) reported the amount being accessed from pensions increased from £1.7bn in the first quarter of 2018 to £2.2bn in the second quarter.
Meanwhile, the number of withdrawals went up from 500,000 to 574,000.
Since the reforms were introduced in April 2015, the number of payments has gone up from 121,000 and the amount of money accessed has risen from £1.5bn.
The figures showed almost £20bn had been withdrawn and more than 4 million flexible payments had been made since the launch of the freedoms.
In Q2 this year, the average withdrawal per person hit £8,595, which was £700 less than in the same quarter last year but almost £1,000 more than in the first quarter of this year.
Tom Selby, senior analyst at AJ Bell, said: "The money involved is truly staggering and the changes are likely to have given a short-term boost to the UK economy, with many over-55s choosing to spend more money today rather than leave it invested in their retirement fund.
"The good news is average withdrawals per person are not spiralling out of control. In fact, while the average withdrawal is almost £1,000 higher than in Q1 2018, it is down by about £700 on the same quarter in 2017.
"It’s hard to tell the extent to which such withdrawals are sustainable without a broader picture of individuals’ finances. Many will have seen the value of their drawdown pot boosted by the stockmarket bull run - the real test of the reforms will come when markets inevitably hit the skids."
In early April this year, the Work and Pensions select committee published a report into pension freedoms and said consumers lacked access to advice and should have more support with accumulation and decumulation.
The MPs also called on providers to protect consumers and offer a default decumulation product.
The Financial Conduct Authority published its Retirement Outcomes Review earlier this month, which showed 54 per cent of people who access their pensions cash them in completely.
Jon Greer, head of retirement policy at Quilter, said: "While these figures are encouraging it is not a sign that the industry and the regulator should be complacent.
"The new world has heralded an increase in vulnerable customers who go into drawdown without advice. In its Retirement Outcomes Review the FCA suggested the introduction of regular wake-up packs and investment pathways.
"Both suggestions could go some way to help these people. But they need to work effectively and we need to continue to develop a guidance model that will encourage people to engage with their pensions."
Andrew Tully, pensions technical director at Retirement Advantage, said: "A new norm has emerged for people to take cash, often with smaller pots being withdrawn fully. Many people are also making multiple withdrawals in a tax year, which suggests they are treating their pension more like a bank account."
He added: "Most people are accessing their pensions at younger ages, certainly before state pension age. This combination of taking multiple withdrawals in a tax year at earlier ages when people are still likely to be earning income from work means many are likely to pay more tax than if they took withdrawals more gradually.
"Treating pensions like bank accounts has certainly generated a welcome windfall for the Treasury due to the extra tax take, which hasn’t been the natural brake some commentators predicted."
rosie.quigley@ft.com
