The data, which reports on pension payments made from the April 2015 until March 2016, shows that £4.35bn has been paid out in 516,000 cash lump sum payments taken out by 232,000 pensioners.
Pension reforms allowing people unrestricted access to their pension savings were announced by the chancellor George Osborne in April 2014 but came into effect last year.
Shrinking lump sums
Despite the easy access to pensions, the tax office figures show that a greater number of people are actually taking out smaller amounts of cash.
The £1.56bn paid out of pensions for the second quarter of 2015 – just after the reforms were introduced – has plunged by nearly a half to just £820m in the first quarter of this year.
Meanwhile, the number of payment has actually increased from 121,000 payments in Q2 2015 to 142,000 individual payments in Q1 2016.
Furthermore, the number of individuals taking money out of their pension pots has also dropped by 12%, from 84,000 in Q2 2015 to 74,000 in the first quarter of this year.
Adrian Walker, retirement planning manager at Old Mutual Wealth, said the HMRC’s findings show that the demand for cash lump sum withdrawals has settled following the reforms.
“Most providers witnessed an initial ‘gold rush’ from last April to around June as customers made use of the freedoms perhaps to pay down debts but if feels like we are approaching something akin to a ‘new normal’,” he said.
Although almost a quarter of a million people have accessed their pension savings since the freedoms were introduced, Walker said this “should not be held up as a measure of success”.
He added that the smaller number of people taking out larger sums from their pensions could be an “indicator” that behaviour is changing.
“What today’s new figures do seem to show is a slight shift in the pattern of pension payments over the last quarter, with a smaller number of retirees taking a larger number of payments. This could be an indicator that behaviour is changing and fewer people are taking larger sums, while a greater number take sustainable regular income withdrawals,” said Walker.
Data from the ABI
Last month, the Association of British Insurers (ABI) published research which found that almost £6bn has been paid out of UK pensions since the freedoms were introduced.
The data shows that £3bn has been paid out in 213,000 cash lump sum payments in 2015, with pensioners taking an average payment of £14,800. Meanwhile, £2.9bn has been paid out in income drawdown payments, which totalled an average of £3,500.
In line with HMRC results, ABI figures also show that the amount of cash lump sum withdrawals fell from £1.3bn and £1.2bn in the second and third quarters of 2015 to £660m by the end of 2015.