10 stats on where the £17.5bn pension freedom withdrawals have gone

A look into where pension freedom withdrawals are going.

Regulators and policymakers have understandably been playing catch-up in the four-and-a-bit years since former chancellor George Osborne uprooted the UK retirement market.

The pension freedoms, while hugely popular, were undoubtedly announced with politics rather than practicalities in mind. And because the reforms were almost entirely untested, it has taken the Financial Conduct Authority (FCA) a while to build a picture of consumer behaviour and recommend any possible market remedies.

Although the FCA’s interim report concluded most people are not squandering their hard-earned pensions, there is evidence some savers are making sub-optimal retirement decisions.

For example, 17%, or £3 billion, of withdrawn pension money has been shoved straight into a bank account. This might not be a problem in the short term. Indeed, it makes sense to have some ready cash available in most cases. But it almost certainly is not an advisable long-term investment strategy, particularly with interest rates at record lows and inflation returning to the UK economy.

We also know too few people regularly review their retirement income strategy. Tackling this lack of engagement will be crucial in ensuring savers are equipped to make the most out of their retirement pots.

There are various things that could help here. These include boosting access to advice and shifting away from rigid communications rules, so savers are nudged into action at points in their lives when they are ready and willing to make decisions.

The proposal for people to be given a ‘mid-life MOT’ to assess their financial health and the wider work on engaging the self-employed to save for retirement could provide a spark for greater levels of innovation in this area. However, this will require buy-in from both politicians and the regulators.

Read on to see 10 statistics about what the pension freedom withdrawals are being used for…

Tom Selby is senior analyst at AJ Bell.

Regulators and policymakers have understandably been playing catch-up in the four-and-a-bit years since former chancellor George Osborne uprooted the UK retirement market.

The pension freedoms, while hugely popular, were undoubtedly announced with politics rather than practicalities in mind. And because the reforms were almost entirely untested, it has taken the Financial Conduct Authority (FCA) a while to build a picture of consumer behaviour and recommend any possible market remedies.

Although the FCA’s interim report concluded most people are not squandering their hard-earned pensions, there is evidence some savers are making sub-optimal retirement decisions.

For example, 17%, or £3 billion, of withdrawn pension money has been shoved straight into a bank account. This might not be a problem in the short term. Indeed, it makes sense to have some ready cash available in most cases. But it almost certainly is not an advisable long-term investment strategy, particularly with interest rates at record lows and inflation returning to the UK economy.

We also know too few people regularly review their retirement income strategy. Tackling this lack of engagement will be crucial in ensuring savers are equipped to make the most out of their retirement pots.

There are various things that could help here. These include boosting access to advice and shifting away from rigid communications rules, so savers are nudged into action at points in their lives when they are ready and willing to make decisions.

The proposal for people to be given a ‘mid-life MOT’ to assess their financial health and the wider work on engaging the self-employed to save for retirement could provide a spark for greater levels of innovation in this area. However, this will require buy-in from both politicians and the regulators.

Read on to see 10 statistics about what the pension freedom withdrawals are being used for…

Tom Selby is senior analyst at AJ Bell.

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

What has happened to the £17.5 billion flexibly withdrawn since April 2015?

Source: Survey of 370 people who have accessed their pension flexibly since April 2015

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