Latest HMRC pension freedom flexible payments stats published with reaction
HMRC has just published its latest update on flexible payments from pensions > https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/702624/Pensions_Flexibility_Apr_2018.pdf
This shows the number and value of taxed payments withdrawn from pensions as cash using the pension freedom rules. A pattern is beginning to emerge of around 500,000 quarterly withdrawals worth around £1.5bn.
Andrew Tully, pensions technical director, Retirement Advantage commented: ‘The appetite to withdraw cash shows no signs of abating and a new norm is beginning to emerge. Significant sums continue to be withdrawn from pensions with many smaller pots being withdrawn fully. It could be that people are reacting to uncertainties in the economic environment, or are simply worried about the legislative goalposts changing again, or they might just want their money.
‘The freedoms have certainly generated a welcome windfall for the Treasury but it’s clear having to pay tax on these withdrawals has not been the natural brake some commentators predicted.
‘We know people are accessing their pensions for the first time at younger ages, and certainly before they are due to retire. We also have seen from our recent research people are using the cash to make home improvements, go on holidays, pay off debts and also save money outside of the pension.’
Free tools are available to help people calculate the potential tax charge for pension withdrawals including here http://www.retirementadvantage.com/pension-tax-calculator
Recent research1 from Retirement Advantage sheds light on how consumers have reacted to the pension freedoms, and reveals one in five (19%) people have withdrawn cash from a sense of concern over the regulations changing.
43% of those polled who had used the freedoms to take some cash felt it was nice to have a bit extra to spend, while 36% said they needed the money.
Reasons for using the freedoms to withdraw cash include:
- 29% put the money in a savings account
- 25% used the money for home improvements
- 18% paid off non mortgage debt
- 17% went on holiday
- 14% paid themselves a regular income
- 12% bought a new car
- 11% paid off the mortgage
- 8% gifted some money to children
- 6% helped family members onto the property ladder
- 2% gave a gift to grandchildren
1. Source: Retirement Advantage research conducted by Censuswide between 1.3.18 and 9.3.18. Online interviews among 1,000 people aged 55+ who have said they have used the flexible rules to access a pension.