Alex Waite Partner at LCP, comments: “The latest figures show a continuation of the trend of more people choosing to withdraw their defined benefit pensions under the Government’s ‘freedom and flexibility’ policy. This will be the right decision for certain individuals, and 2018 was yet another record year for the number of transfers. However, at the same time we are seeing many people having their freedoms capitalised on by fraudsters, which remains a huge concern for the pensions industry. The recently introduced ban on ‘telephone cold-calling from the UK’ is a helpful start, but the scammers have moved online and overseas and more is needed to protect vulnerable people reaching retirement.”
“The Work and Pensions Select Committee recommended, in its report on pensions freedoms published last April, that there should be a default decumulation pathway, but the government rejected this concept. Having encouraged pension savings, through auto-enrolment, the Government also needs to introduce a coherent policy regarding what happens when it is time to turn those savings into a retirement income.”
Stephen Lowe, group communications director at Just Group, said that while the figures are interesting, they are hardly illuminating.
"These are record numbers but that's only to be expected as more people reach the age they can take a flexible payment and awareness of flexible options increases. Our big problem is that we don't have any 'what does good look like' benchmarks to compare these figures to, plus they are only a partial snapshot.
“Billions of kinds of tax free cash payments are not included in these figures nor are many other pension withdrawals, such as small pot withdrawals or purchases of guaranteed income for life solutions. Nor do the figures tell us how many individuals have withdrawn money, how much they have withdrawn or how often.
“There is nothing in these figures that ought to make us believe everyone making pension withdrawals properly understands the tax implications of their actions, the restrictions they are now subject to, or the longer term consequences of withdrawing money. Nearly four years into the era of pension "freedom", we perhaps ought to be questioning the usefulness of the information we do have if we are going to start dealing with some of fundamental questions about how these pension reforms are working in practice.
“And we should do more to ensure people understand their options by actively encouraging use of the Government’s free, independent and impartial guidance service, Pension Wise. It’s an excellent way to help savers find their way around what can be very complex decisions.”
Quarterly flexible payments from pensions statistics
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