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Pension Freedom Data Released

Gresham Wealth

Some 18 months since the introduction of ‘pension freedom’, data has been released as to how pensioners have been using their newfound options. Whilst at the time of the changes many concerns were voiced that pensioners would withdraw all their funds and go on a mad spending spree, it seems that this hasn’t been the case.

The information, released by The Association of British Insurers, reveals that a total of about £4.3 billion has been taken out of pensions in lump sums in the year April 2015 – April 2016, with the average cash payment being £14,500. £3.9 billion has been paid out via 1.03 million drawdown payments, with an average payment of £3,800.

Statistics from the latest quarter (Q1 2016) indicate that 57% of individuals withdrew money from their pension pots at a rate of 1 percent in the last quarter, which would equate to around 4 per cent a year, suggesting most pensioners are taking a sensible approach.

Despite the overall trend for sustainability, there are a small percentage of retirees that could be at risk of running their pension pots dry during retirement.  In fact 4% of pots had 10% or more withdrawn during the first year of the new rules and there are also those who took their whole pot in one go.

Although pension freedom has brought more options to retirees, with more options comes greater risk of getting it wrong, especially for the lay person.

After all, most of us spend the majority of our working lives saving towards a pension fund, so the last thing you want to do is squander even a fraction of your hard-earned funds by taking the wrong course of action. Taking professional advice has never been more important to help individuals fully understand the implications of their choices; even more so considering that annuity rates have fallen so drastically and are likely to fall further following the recent decision to cut interest rates.

So far as our advice to clients goes, it very much depends on the individual and their particular set of circumstances. For some, taking some or all of their cash free entitlement might be necessary to fund retirement or make planned expenditures.

However, this should not be the default position. Where clients have other sources of income to draw down from in retirement, this may be the preferred approach. After all, one of the other significant changes that came about as part of pension freedom was the changes to death benefits, which we discuss at length in a separate article. In short, keeping money in a pension environment may now be a much more tax efficient way for individuals to pass on wealth to their spouse or future generations.

If you are approaching age 55 and would like to discuss your options regarding your pension, please contact us.


Please note that Gresham Wealth Management Limited is only able to service clients with £250,000 in their pension pot as a minimum level.


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