Pensions - Articles - Canada Life and Aegon on HMRC pension withdrawal figures

 Andrew Tully, technical director at Canada Life, commented: “Treating your pension like a bank account shows no sign of abating, and if anything five years on from the pension freedoms its only growing in popularity.

 “Withdrawing cash can trigger unintended consequences, for example limiting the amount you can subsequently save into a pension. This can be very restrictive for people who are still working as HMRC restricts subsequent tax efficient pension savings to a very low £4,000 a year.

 “Inevitably the significant amounts of cash leaving the pension system will in many cases be triggering large and often unexpected tax bills. But these tax bills don’t appear to be the natural brake on behaviour many predicated when the rules were changed. If anything people are seeking to strip cash from their pensions as rapidly as possible for fear of subsequent rule changes.

 “The genie is well and truly out of the bottle.”
  

 Steven Cameron, Pensions Director at Aegon, on today’s flexible payments from pensions figures: “Today’s figures show the UK public’s love affair with the flexibility pension freedoms offer continues to hot up with a record number of 828,000 payments in Q4 of 2019. Reassuringly, the average withdrawal amount continues to fall, down 5% in value compared to a year ago, suggesting individuals are exercising restraint around how much to take as an income.

 “Even in times of uncertainty as we’ve seen in recent months ahead of Brexit, there appears to be no resurgence of desire for the guaranteed income on offer from annuities. This may not be surprising though with interest rates continuing to languish at rock bottom levels, making the amount paid out from annuities look particularly unappealing.

 “With people living longer, proper retirement planning is needed to safeguard people’s wealth, particularly if choosing to use flexible drawdown in retirement. Here, retirees remain invested in the stockmarket raising concerns over the impact a major fall could have on their retirement prospects including the risk of running out of money if they withdraw too much too soon. Seeking professional financial advice can give peace of mind that your financial affairs are being taken care of, whether that’s about having enough secure income to cover the basics, taking a sustainable regular income, or investing wisely.”