Since the introduction of flexible pensions in 2015, an increasing number of people are utilising the option to make a lump sum pension withdrawal from their funds. However, pension withdrawal rates are still within government forecasts, allaying concerns of there being a ‘run’ on pension funds leaving some without the means to support them into their old age.
2017 marked the third year of (then Chancellor) George Osborne’s idea to provide more flexible access to lifetime pension savings, and pension withdrawal rates were 15% higher in 2017 than in 2016. Following introduction of the new legislation, around £3.55bn was withdrawn in 2015 at a rate of around 125,000 withdrawals per quarter. By 2017 the value of withdrawals had increased to £6.5bn and at a rate of 400,000 withdrawals per quarter, but the sums being withdrawn had not increased significantly, suggesting pensioners remain cautious about utilising the option.
With annuity rates still on the low side, the belief is that most withdrawals are made for the purposes of alternative investment, again bucking the idea that the new freedoms would result in a rash of status symbol purchases.