HMRC’s latest figures for flexible payments from pensions shows £2.26bn was accessed in 2Q18.
This was the first time pension freedom payments have been more than £2bn in a quarter since the reforms were introduced three years ago.
The HMRC data also showed the average withdrawal per person hit £8,595, almost £1,000 higher than the previous quarter but £700 lower than 2Q17.
£20bn looms
The 2Q18 results mean, in total, £19.73bn has now been withdrawn since April 2015.
Further, over four million pension payments have now been made to more than two million individuals.
Jon Greer, head of retirement at Quilter, said: “Since 2015, the number of individuals has increased 214%, while the number of payments has increased an astonishing 374%.
“This increase is no reason for alarm, as people are not draining their retirement pots to pay for Rolls Royces and trips to the Caribbean,” Greer said.
Figures highlight popularity
Tom Selby, senior analyst at AJ Bell, said the HMRC figures show the popularity of the pension freedoms shows no sign of abating.
“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 1Q18, it is down by about £700 on the same quarter in 2017,” he said.
Selby said it is hard to tell the extent to which the withdrawals are sustainable without a broader picture of individuals’ finances.
“Many will have seen the value of their drawdown pot boosted by the stock market bull run – the real test of the reforms will come when markets inevitably hit the skids,” Selby said.
Financial awareness still lacking
Samantha Seaton, chief executive at Moneyhub, said HMRC’s quarterly figures are beginning to paint a clearer picture of how those approaching retirement are taking advantage of pension freedoms.
But, what’s concerning is that, at retirement, there seems to be a significant lack of education and attention from product and service providers, Seaton said.
“Although the government’s pension dashboard plans are up in the air, it’s a great opportunity for tech firms and pension providers to step in and fill this gap.
“Financial awareness is closely correlated with long-term financial health, and providing real-time visibility of people’s savings, alongside support and awareness helps keep savers on track for retirement,” Seaton said.
