The latest HMRC figures showing £1.7bn has been withdrawn from pension schemes under flexible pension rules during the last quarter, is just the tip of the pension withdrawal iceberg and need to be treated with caution, according to Stephen Lowe, group communications director at retirement specialist Just Group.
Lowe is concerned that what he calls a “very specific set of figures”, an increase of 7% on Q1 2017 figures, don’t reflect the bigger picture.
“They only cover taxable money withdrawn from pensions under the new rules,” he said. “We know from other sources that the over 55s are taking large amounts of tax-free cash using flexi-access drawdown which is not included in the data reported, and nor is the tax-free cash element of UFPLS.
“On top of this, purchases of Guaranteed Income for Life solutions and any withdrawal from pre-2015 capped drawdown accounts are not included.”
Lowe points to detailed data from the Financial Conduct Authority’s Financial Lives survey, published earlier this week, which showed that among those 55-64 year olds planning to start taking money from a defined contribution pension scheme in the next two years, all said they understood their pension options very well (71%) or to some extent (29%).
However, when asked supplementary questions about the details of each flexible option, most could not answer correctly or said they had never heard of it.
“It is disappointing therefore that the government has chosen not to include opt-out default guidance in the Financial Guidance and Claims Bill which is now reaching its final stages.
“All the evidence suggests large numbers could benefit by receiving help to make better informed decisions when making crucial choices in how to use their pension savings and so they don’t make uninformed decisions they may end up regretting in later life.”