Steven Cameron, Pension Director at Aegon, comments: “The 2018/19 tax year saw a record number of people accessing their pensions flexibly showing popularity for the pension freedoms continues to grow. Since they were introduced four years ago, over 1.1 million people have taken flexible payments totalling £25.62bn with a record 539,000 having taken a payment in the last 12 months.
“The freedoms marked a radical change in the retirement landscape which is now almost unrecognisable from where it was before inception in 2015. Individuals now have much more control over their pension savings including allowing those looking for a more gradual transition into retirement the chance to work, combining reduced hours with part pension as they approach or move beyond traditional retirement age.
“While the number of payments made is also at a record high, the average amount being withdrawn has fallen year on year since inception. In the first year, the average value was £8,430. This had fallen to £3,713 for 2017/18 and has fallen again to £3,358 in 2018/19 suggesting individuals are exercising restraint over how much to take out.
“This is encouraging as with greater flexibility comes greater responsibility and the freedoms have also introduced an increased risk. Historically, retirees would receive a fixed income which would last them for the rest of their life, but now many are responsible for investing appropriately and ensuring they do not overspend, risking their pension pot running dry part-way through retirement. The more people who take advantage of pension freedoms, the greater is the need for access to professional financial advice.”
Commenting, Steve Webb, Director of Policy at Royal London said: “The Treasury needs to make up its mind whether it wants more people to save in a pension or not. What is remarkable is how little the cost of pension tax relief has risen in recent years given the millions of extra workers who have been automatically enrolled into workplace pensions. Every time the Treasury attempt to cut the cost of tax relief they add new complications such as the ‘tapered annual allowance’ and the ‘money purchase annual allowance’ which make the system bewilderingly complicated. These new figures provide no justification for further fiddling and salami slicing with a system that should be stable over the long-term”.
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