The new pension freedoms regime was put in to place in April 2015, allowing people 55 and over to access their pension as a taxable income.
According to HMRC, 200,000 people withdrew money from their pension under the new scheme in the last three months of 2017, to a total of £1.5 Billion. The total amount of £6.5 Billion withdrawn under the new rules during 2017 was almost £1 Billion more than that recorded in 2016.
Since the new pension freedoms rules have been introduced, £15.7 billion has been accessed in this fashion.
According to Steve Webb of Royal London, the pace of withdrawals from pensions is now settling down into a more moderate pace.
"This is very much the new normal and suggests that a significant number of those at or in retirement continue to value the flexibility given by the new legislation. However, it remains important that individuals take expert advice to make sure that the withdrawals from their pension fund are sustainable in the long term".
One aspect of the new environment that has yet to be tested is what will happen when investors that are living off an income experience a drop in fund value. This issue is raised by Steven Cameron, who asks in relation to this issue: "whether they reduce the amount of income they’re taking in the short-run to avoid depleting their fund too quickly,"
Ian Brown of Old Mutual Wealth offers some insight in to this issue: "HMRC’s numbers show that people are beginning to grasp the power of freedoms. They are withdrawing less per payment and increasing the frequency of the withdrawals."
Are you heading towards retirement and thinking of taking an income from your pension?
Contact Westminster Wealth Management today and one of our skilled advisers can construct a financial plan for you that will enable you to meet your financial goals.
The value of investments and income from them may go down as well as up and you may not get back the original amount invested.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Pension freedom withdrawals rise