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The Actuary The magazine of the Institute & Faculty of Actuaries

Pension freedoms result in over £9.2bn of payouts

Retirees have accessed £9,210m worth of savings since pension freedoms were introduced in April 2015, according to HMRC figures released today.

People taking advantage of freedoms ©Shutterstock
People taking advantage of freedoms ©Shutterstock

They show that more than 1.5 million payments have been made using the freedoms, with 162,000 people collectively taking out £1.56bn flexibly from their pension pots over the last quarter of 2016 alone.

In addition, the number of individuals taking out payments has almost doubled from 84,000 when the freedoms were first introduced, to the end of last year.

Economic secretary to the treasury, Simon Kirby, said: “Giving people freedom over what they do with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do. 

“These figures show that people continue to take advantage of the choices on offer, choices only made available since the government’s landmark pension freedoms were introduced in April 2015.

“We are working with our partners, including Pension Wise, the regulators and pension firms, so that savers have the support they need to understand the options available to them.”

The HMRC figures for ‘flexible payments’ cover partial or full withdrawal from the pension pot, taking money from a flexible drawdown account or buying a flexible annuity.

Although these payments have resulted in more people having increased access to their savings, there are concerns about how that money is being spent, and whether it is being used to fund an adequate long-term income.

AJ Bell pension expert, Gareth James, said: “While it is good to see that the pension freedoms are being utilised by a large number of people, it is dangerous to use the £9.2bn as a measure of success when it doesn’t tell us what people are doing with that money. 

“Are they using it to provide a regular and sustainable income as pensions are designed to do, or are they spending it too quickly and likely to run out of money too quickly?  

“It is important that the government carries out a more detailed analysis of how the pension freedoms are being used before any realistic assessment of their success can be made.”