As the second anniversary of the introduction of the Government’s pension freedoms approaches, the Treasury has announced that the total amount cashed in by pension savers has reached £9.2 billion, made up of some 1.5 million separate withdrawals.
The rate at which people are cashing out their pension pots is also increasing, with 162,000 pensioners making 393,000 separate withdrawals totalling £1.56 billion in the fourth quarter of 2016 alone.
The Economic Secretary to the Treasury, Simon Kirby MP, said:
“Giving people freedom over what they do with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do. These figures show that people continue to take advantage of the choices on offer: choices only made available since the government’s landmark pension freedoms were introduced in April 2015.
“We are working with our partners, including Pension Wise, the regulators and pension firms, so that savers have the support they need to understand the options available to them.”
Of course just because the Government allows pension savers to withdraw as much of their pension pot as they wish does not mean that this is the best course of action for everyone. In most cases there is no legal requirement to obtain professional financial advice before accessing pension savings, but where someone does consult a financial adviser, the adviser must carefully consider all available options and recommend the course of action that s/he believes is in the client’s best interests, regardless of their personal wishes.
Many advisory firms remain extremely reluctant to process ‘insistent client’ transactions, where a client chooses to pursue a different course of action to that recommended by their adviser.
The Treasury press release also makes reference to Government plans to cap pension exit fees, ban cold calling in relation to pensions and introduce a Pensions Dashboard where savers can easily view all their pension savings in one place.
In a separate announcement, the Treasury has confirmed that, from April 2017, consumers will be able to make up to three withdrawals, of not more than £500 on each occasion, from their pension pots in order to pay for regulated financial advice. These withdrawals, which will be restricted to one per tax year, can be made at any age. The withdrawals are permitted from all holders of defined contribution (money purchase) pensions, and can also be used to pay for robo-advice as well as traditional financial advice.
The ability to withdraw sums prior to retirement in order to fund advice fees was one of the recommendations of the Financial Advice Market Review, a joint initiative by the Treasury and the Financial Conduct Authority aimed at improving access to financial advice.
Regarding this announcement, Mr Kirby said:
“Pensions and savings decisions are some of the most important a person will make during their lifetime. This allowance will help people get the vital financial help they need to plan for their retirement.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.