More than 1m retirees have accessed their pension pots since new freedoms were unveiled in April 2015.
Since then, retirees, or anyone aged over 55, have been able to access their pensions savings as they wish, rather than having to only take an annuity or income drawdown product, subject to their marginal rate of income tax.
There were fears at the time of the launch of the freedoms that this would result in pensioners emptying their savings and spending all their money on sports cars and luxuries.
But the latest data from HMRC shows there have been 5.4m payments to 1.04m individuals, amounting to a total of £23.5m.
Where has all that pension money gone?
That is a drop in the water compared with the amount that is currently in pension products.
For example, Financial Conduct Authority data suggests £179bn is held in workplace defined contribution pensions in 2017.
With such a comparatively small amount withdrawn among 1m pensioners, there is little evidence of a boom in pensioners driving sports cars or sailing the globe.
A Lamborghini Aventador would cost £264,985, according to car website Parkers. It would therefore take 89 Lambos to get to the £23.5m.
A world cruise could set you back £8,729, according to Cruisedeals.co.uk. It would take 2,702 cruises to get to the £23.5m total that has been withdrawn from pensions.
This isn’t really enough to go round all those 1m pensioners who have made withdrawals since 2015 and suggests they are using the money elsewhere.
Should you raid your pension pot?
There are plenty of sensible reasons to access your pension. It is your money that you have worked hard to save for so you should be able to access it.
It may feel too early to go into income drawdown or to purchase an annuity. You may need to pay for care bills or want to buy a property for yourself or to help your loved ones get on the ladder.
You may even want that sports car or world cruise.
Whatever reason you have for accessing your pot, it is important to seek regulated financial advice.
A financial adviser can help ensure you plan a retirement strategy so you can spend wisely if you wish and don’t run out of funds, while also managing any tax liability.
- The value of an investment and any income from it can fall as well as rise and you may not get back the original amount invested.
- Past performance is not a reliable indicator of future performance and should not be relied upon.
- HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen