A staggering £7.6 billion has been cashed in from pension pots, since new freedoms were launched last year.
The change in rules, which came into effect in April 2015, allows those aged 55 and over to cash in their pension pot and access their savings how they want, whether that is buying an annuity, drawing down a regular income or just taking out a lump sum.
Since then, 1.1 million payments have been made, with 158,000 people accessing £1.54 bilion flexibly in the last three months alone, according to data from HMRC – up from 159,000 individuals in the previous quarter. In total, £7.65 billion has been withdrawn since April 2015.
When doing so, pensioners pay no tax on the first 25 per cent of their funds, but pay regular tax on the rest of the amount.
Recent research from the ABI shows that the vast majority of pension savers are now using the new freedoms well and making sustainable long-term retirement income decisions.
The Economic Secretary to the Treasury, Simon Kirby, says: “Today’s figures prove that allowing people to do what they with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do. The freedoms remain a popular choice as people consider the different ways to fund their retirement.”
The rule change was predicted by some to spark a wave of new “granlords”, as those with retirement savings potentially put their money into the buy-to-let sector. While sums initially withdrawn were around the £20,000 mark, though, typical withdrawls have no fallen to a much lower £10,000, with research suggesting that home improvements is a popular use of the cash.
The freedoms apply to those who do not already have an annuity in place, with former Chancellor George Osborne announcing that they would be extended to include those too. Now,though, the new Conservative government has made a U-turn, deciding not to allow pensioners to sell off their existing annuities, as it could put consumers at risk.
Majority of homeowners do not plan to use property as pension
16th August 2016
The majority of homeowners do not plan to use their property to fund their retirement, reveals new research.
A survey by Aegon shows that 74 per cent of homeowners would only use their home as a last resort to provide a retirement income, or don’t consider their home as a source of retirement income at all.
Steven Cameron, Pensions Director at Aegon UK, says: “Our research shows that people view the value in their home and the funding of their retirement very separately. It’s encouraging that people are not setting out to rely on equity in their home as a silver bullet to solve a lack of pension saving. And with the right planning and saving behaviours it can probably be avoided. However, those who don’t plan ahead and realise too late that their house is by far their most valuable asset, may be forced into making some very difficult decisions.”
The research also highlights that while more than half of people (53 per cent) want to leave their home to their loved ones, actually moving in to live with family in retirement is extremely unattractive to most people.
“Those homeowners who don’t make adequate pension provision may find their home may be their only asset of value meaning they may be forced into choosing the ‘least worst option’ for using it to fund retirement. Our research found that few of the possibilities scored well. When pushed, 69 per cent said they’d look to buy something smaller although it would require substantial downsizing to release enough to generate any significant income for life. There was almost no appetite for moving in with family (3 per cent) or renting out a room (3 per cent). And moving into a retirement home (5 per cent) was only marginally less unpopular.”
The trend is backed up by the HSBC’s Future of Retirement research, which found that just one in eight working age people (12 per cent) say that downsizing and/or selling a property will help them to fund their retirement. The practice, though, is “particularly prevalent” in Australia and the UK, where one in four (26 per cent) and one in five (22 per cent) would consider doing so.
This compares to just 6% of existing retirees globally who are using income from downsizing or selling a property to help fund their retirement.Google+