The average amount withdrawn per individual throughout September, October and December 2020 was £6,600, falling by 3% from £6,800 during the same months in 2019.
In total, HMRC has confirmed over £42bn has been flexibly withdrawn from pensions since the freedoms were introduced.
Comparing each Q4 for trends, there has been a 131% increase in withdrawals over a four year period between 2016 and 2020, while there has been 122% increase in people accessing their pensions in the same period and a 52% increase in value.
Andrew Tully, technical director, Canada Life commented: “We are now seeing a gradual continuing upwards trend in both the number of individuals opting to withdraw money from their pension savings, and the amount they are choosing to take. This growth towards the end of the year could well be down to pent-up demand from the first half of the year when most of the country was in various states of lockdown.
“We have now seen more than £40 billion withdrawn from pension savings since the inception of pension freedoms in 2015. A huge sum of money to be withdrawn in a five year period. This continued growth in the number of individuals accessing their pensions implies that we are seeing more and more working people look to their pension pot to manage their expenses or cover unexpected costs.
“It is absolutely essential that anyone choosing to access their pension for the first time should be aware of a potential sting in the tail – the money purchase annual allowance. This is especially important for those of working age who want to continue paying into their pension. With the current savings limit set dangerously low at £4,000 it could severely limit the amount you are able to save in the future. Particularly given the impact of the pandemic, we need to consider a significant increase to the allowance or better still remove it altogether.”
The Money Purchase Annual Allowance restricts the amount of money people can save into their pension once they’ve flexibly access it – the current limit is £4,000 a year - and includes both personal and employer contributions if saving through the workplace.
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