British pensioners took £6.5bn out of their pension funds last year, the highest figure since the ‘flexible payments’ system was introduced.
According to new figures from HM Revenue & Customs (HMRC), almost £1bn more was paid out in flexible payments in 2017 than in 2016, suggesting that pensioners are becoming more comfortable with the idea of flexible withdrawals.
HMRC data shows that pensioners have been gradually increasing their withdrawals over the past two years.
In 2015, just £3.5bn was paid out, rising to £5.5bn in 2016. Over the course of 2017, 772,000 pensioners made 1.673m withdrawals, totalling £6.5bn. This means that the average withdrawal amounted to £3,885.
“These new figures show that withdrawals under pension freedoms are now settling down to a steady level,” said former pensions minister Steve Webb.
“Roughly 200,000 people are using the freedoms each quarter and are withdrawing a steady £1.5bn per quarter. This is very much the new normal and suggests that a significant number of those at or in retirement continue to value the flexibility given by the new legislation.
“However, it remains important that individuals take expert advice to make sure that the withdrawals from their pension fund are sustainable in the long-term.”
Pension freedoms were introduced in 2015 and allow anyone over the age of 55 to make lump sum withdrawals from their private pension pot at any time.
Prior to this, pensioners were forced to purchase annuities, which provide a guaranteed yearly income.