Pandemic Drives Pension Withdrawals
Growing numbers of pension savers have been withdrawing cash from their pots, in a sign that over-55s are turning to their retirement funds for a short-term cash boost during the pandemic. Under the pension freedoms, over-55s with defined contribution pensions, can take money out of their pots, subject to tax rules.
HM Revenue and Customs (HMRC) figures show 247,000 withdrew from their pensions throughout July, August and September 2020.
That was a 6% increase compared with the same period last year.
It was also a 2% rise compared with the previous three months – which HMRC said is contrary to normal seasonal patterns. HMRC’S report said “The number of individuals making withdrawals typically peaks in April, May and June, the beginning of the tax year, before dropping tin July, August and September. The average amount withdrawn per person in July-september was £6,700, falling by 7% from £7,200 during the same months in 2019.
The total value of withdrawals from pensions since flexibility changes in 2015 has exceeded £37 billion. A Government spokesman said: “Pensions freedoms give people real choice, but we would also urge savers to seek guidance when making decisions about how to use their hard earned pension pots.”
We concur with the Government and Financial Conduct Authority, in that it is wise to seek advice, or guidance. However, there is a difference between advice and guidance. Guidance simply means making you aware of the options available, however you have to decide which option is best for you and, in fact, whether you should even be accessing your pension pot in the first place!
Here, at Brian Mole IFA, we offer Independent ‘advice’, meaning that we will be aware of your circumstances, requirements, and all of the options available.
We will then advise you, firstly as to whether you should access your pension, and then on the most appropriate option. This can be an extremely complex area, where making the wrong choice can involve serious costs and disadvantages.