Commenting on the significance of these figures, Malcolm McLean, senior consultant at Barnett Waddingham, said: “We need to be a bit cautious about drawing too many conclusions from these figures. Some providers did not report their 2015 data to HMRC as it was not a requirement to do so until 2016. Nevertheless it still seems reasonable to assume than many more people than originally estimated by the Treasury are withdrawing their funds under the new arrangements and may be heading for trouble in later life as a result.
“This all points to the need for more reliable data not only as to the numbers involved, but also as to the reasons why people are taking money out of their pension savings at a level or at a relatively early age without due regard to the possible longer term consequences for themselves of doing so.
“We must also do more to encourage the taking of advice and guidance to ensure consumers are aware of the tax implications of their decisions and do not fall into the clutches of the fraudsters and scammers who are still very active in this area on the back of pension freedoms.”
Commenting on the publication by HMRC of Flexible Payments from Pensions, Stephen Lowe, group communications director at Just, said: “We now have two year’s figures since the April 2015 pension reforms and there is continued growth in the numbers taking flexible payments.
"There were 176,000 people taking payments in Q1 2017 which is nearly 9% higher than the previous quarter. Comparing the second financial year with the first, there was a 69% rise in the numbers taking payments to 393,000 although some growth will be due to more firms reporting figures. In the last year, people have taken £6.45 billion out of pensions via flexible payments, an average of £16,412 each.
“These are significant sums but what the figures don’t tell us what people are doing with the money. For most people, the only reason to take money out of the tax-advantage pension environment is to spend or to give it away. It makes little sense to take the money, potentially being stung by tax, just to park it in cash although research from the PLSA found two-thirds taking payments had saved or invested some, of which 60% were using current accounts or cash ISAs.
“We think there needs to be a sense check when people choose to begin taking flexible pensions to ensure they understand the pros and cons. One way would be to ‘auto enrol’ people into Pension Wise guidance in the same way they are now auto-enrolled into workplace pension saving.”
to view HMRC statistics on Pension Freedoms please click here
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