Quarter two (Q2) 2019 saw £2.75bn withdrawn from pension pots under the pension freedoms rules, a 21 per cent increase on the same period in 2018, the latest data reveals.

Figures published by HM Revenue and Customs (HMRC), today, 31 July, revealed there was also an increase in the number of people making withdrawals this quarter compared to the same period in 2018, with 336,000 making a withdrawal compared to 264,000.

HMRC noted that Q2 usually sees larger withdrawals than other quarters as some taxpayers plan their withdrawals around the start of the tax year. Previously this has been driven by larger value withdrawals in Q2, but this year this is driven by increased numbers of individuals withdrawing.

The average amount withdrawn per individual in Q2 2019 was £8,200, down from £8,600 in Q2 2018. Since reporting became mandatory in 2016 Q2, average withdrawals have been falling steadily and consistently, with peaks in the second quarter of each year.

The government department revealed that in total over £28bn has been withdrawn from pensions since the reforms were introduced in 2015.

Commenting, Royal London pensions specialist, Helen Morrissey, said: “Today’s figures show that enthusiasm for the pensions freedoms remains high with a record level of pension withdrawals and a record number of people taking money out of their pensions.

“But the average amount withdrawn is down to £8,200. This compares to £8,600 a year earlier. This could indicate that people are taking a prudent approach of taking smaller amounts as and when they need it as opposed to taking all of the money at once. This flies in the face of initial fears that people would empty their pots and leave themselves vulnerable in later retirement.”

Aegon pensions director Steven Cameron, noted: “Over the last four years the retirement behaviour of over 55s has been significantly influenced by pension freedoms and today’s figures show more people are choosing to access their pension, but increasingly withdrawing a smaller amount when they do.

“With people no longer choosing to retire at a single point in time the freedoms give them the flexibility to transition into retirement by accessing some retirement savings to help support a reduced working pattern. Older workers want to be able to plan their retirement on their own terms and the introduction of pensions freedoms enables that by allowing them to reduce their working hours while enjoying more leisure time.”

However, it was also revaled that savers have been hit with emergency taxation for accessing the freedoms, with the total amount now reclaimed from HMRC since the introduction of the freedoms standing at £480m. The average claim has risen from £2,003 in Q2 2018 to £2,715 in Q2 2019.

AJ Bell senior analyst, Tom Selby, said: “These latest figures continue to expose the damage caused by HMRC’s insistence on overtaxing savers when they first take taxable income from their pension using the retirement freedoms. The near £500m reclaimed through official forms is just a small part of the picture, however, with the vast majority who don’t jump through these government-imposed hoops potentially having to wait until the end of the tax year to get their money back.

“It is incredible that more than four years on from the introduction of the pension freedoms we still have not had any public consultation on HMRC’s approach to taxing withdrawals. While clearly there are other priorities for the government at the moment – most notably Brexit – it is unacceptable that this issue, which affects every person who accesses their fund for the first time, has been ignored.

“We know the current approach is causing huge confusion and in some cases financial hurt to people. The politicians who introduced the pension freedoms now need to take responsibility for making the tax system work for those utilising the flexibilities.”

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