A report from HMRC has shown that in the three months to the end of June this year, a record breaking £1.86bn was taken in cash by members from their schemes. This represents the highest amount withdrawn from defined contribution schemes in any three month period since the pension freedoms were introduced in April 2015 and sees the total amount of cash drawn down under the new freedoms reach £10.8bn.
The pensions industry broadly welcomed the new freedoms introduced in the Budget of 2015, not least because of what were held to be punitively low annuity rates at that time. Defined contribution scheme members have clearly also welcomed the new ways in which they can access their pension savings, with the amount withdrawn each quarter having increased consistently since March 2015.
Some concerns are expressed, however, as to whether all those members accessing their scheme funds have taken proper advice on the implications for their future retirement income. According to a report from the Financial Conduct Authority (FCA) in July, 30% of people taking drawdown from schemes did so without taking professional advice. Before 2015 only 5% of people who took cash from their schemes did so without first taking advice.
Interestingly, where pension pots have been fully withdrawn, 52% were not spent but were moved into other savings or investment vehicles which, according to the FCA, is due to a lack of public trust in pensions.