The data also showed that in 2023 to 2024, £15.3 billion in taxable payments was withdrawn from pensions flexibly. This has increased from £12.9 billion in 2022 to 2023 and £11.2 billion in 2021 to 2022.
Adrian Lowery, Financial Analyst at wealth management firm Evelyn Partners, observes: “Personal pension numbers are back below the pandemic-depressed figure of 6.84 million that was recorded in 2020/21, and it’s surprising because in 2021/22 the number of scheme members recovered a bit to 7.44 million as the shock of Covid wore off. This suggests the cost of living crisis continues to weigh on pension savings.
“You might expect membership of personal pensions to rise year by year, financial shocks aside, as the population grows and awareness of the need for private pension provision spreads. So it just goes to show the fragility of personal pension saving when there are so many other calls on household finances, and it could well be that soaring mortgage costs in 2022/23 pressured savers into rowing back on their pension commitments and ditching policies.
“This 8 per cent drop in numbers saving into a personal pension is revealed at a key moment in the national debate over tax reliefs. Should the Chancellor decide to try to plug holes in the public finances by watering down pension tax relief, there is the danger that people will turn away from pension saving as major incentives are removed. At a time when the demands on retirees’ funds threaten to grow ever higher – only this week a planned cap on care costs was ditched - the prospects for some could be bleak.
“One positive is that the number of self-employed making individual contributions to a personal pension remained broadly constant in 2022 to 2023 compared to 2021 to 2022, at roughly 340,000 in both tax years.
“Meanwhile, the data also shows that the value of ‘taxable flexibly accessed payments’ and the number of savers accessing pensions in this way is surging year-on-year. This could purely be a case of more people with defined contribution pension pots reaching retirement age – a trend that is likely to keep going as the numbers holding defined benefit pensions drop off.
“However, HMRC says that 42 per cent of individuals who have received taxable flexible pension payments since flexibility changes were introduced in 2015 made their first withdrawal while aged 55 to 59. Meanwhile, 28 per cent were aged 60 to 64, and just 20 per cent were aged 65 to 69.
“This does suggest that many people are tapping into their pension quite early on, which is fine if they have a retirement plan in place – but less so if they are just using it as a savings pot to subsidise everyday expenses, as they might find there is not much left later in retirement.”
HMRC Private pension statistics commentary: September 2024
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