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The Pension Freedom strategy 100 days on

The new Pension Freedom strategy is 100 days old. So how is the policy working out?

Early findings show that people with small pension pots are rushing to cash them in and those with larger pots seem more likely to choose an annuity.

This may be seen as an encouraging sign that the Over-55s are taking more care with substantial pension plans which really could provide an income for life.

The trend has strengthened since the new pension freedoms came into force 100 days ago, when the Chancellor of the Exchequer gave current savers the right to do what they wanted with their pension once they reach the age of 55.

According to the Treasury, more than 85,000 people have dipped into their pension plans so far, cashing in a total of £1.3bn.

You might notice these people around and about; celebrating with a dream holiday or buying a new car or ordering a kitchen extension. Others, more sensibly, have paid off mortgages and other debts.

In the first two months, 65,000 people exercised their new right to withdraw cash – taking out more than £1bn, the ABI (Association of British Insurers) said.

Pension freedoms in numbers (Source: HM Treasury/ABI):

  • Launched 6 April 2015
  • £85,000 cashed in pensions
  • £1.3bn cash withdrawn
  • £15,300 average cash taken out
  • £720m invested in income drawdown
  • £69,900 average drawdown pot
  • £630m spent on annuities

Many have discovered that exercising their freedoms is a frustrating process fraught with delays, as not all pensions providers are allowing their customers to withdraw partial cash sums, as the Government intended.
According to the Treasury, more than 85,000 people have dipped into their pension plans so far, cashing in a total of £1.3bn.

Concern is mounting that people now have to be wary about higher charges and scam merchants, but more importantly tax charges.

The first 25% withdrawn is tax-free, but after that you pay normal amount of income tax. Some who cash in large sums could find they are pushed into the 40% tax bracket.

Read more about the The Pension Freedom Strategy in our previous article HERE

The Pension Freedom strategy 100 days on was last modified: July 21st, 2015 by simon.proudfoot

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