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UK official figures show cash withdrawals from pension pots have risen by almost a fifth, raising concerns that retirement savings are being squeezed during the cost of living crisis.
According to statistics, between April and June this year, 567,000 people withdrew £4 billion of taxable pension funds from their pensions. to the latest data From HMRC.
This compares with 519,000 people withdrawing £3.4bn in the previous quarter. The average withdrawal amount between April and June was £7,100, almost a fifth (17%) higher than withdrawals in the same quarter of 2022.
Alice Guy, head of pensions and savings at investment platform Interactive Investor, said: “It’s very worrying that more and more people are withdrawing money from their super at higher interest rates.”
“Superannuation savings take years of dedication and hard work to build, and it’s concerning that so many people are having to dip into those savings at a rate that may be unsustainable.”
Advisers say household heads may rely more on retirement savings to help them weather periods of high inflation.
Jon Greer, director of retirement policy at consultancy Quilter, said: “This may be due to rising energy bills and soaring food prices, with pensioners feeling they need more money to get by each month.”
“While the state pension will rise in line with wages and help offset some of the costs, it will not be nearly enough to keep people dependent.”
Figures this week also showed a surge in the number of savers breaching their annual savings allowances, leaving them facing pension tax.
The standard annual stipend at the time of data collection was £40,000. Superannuation savings above this threshold are not eligible for tax relief and are subject to clawback tax at your personal marginal rate.
Figures show that 53,330 savers breached the AA in the 2021-22 tax year, an increase of 21.5% from 43,870 the previous year.
Contributions above AA reported through self-assessment totaled £1.2bn in 2021-22, up from £814m in the previous tax year.
In 2021-22, pension schemes reported 11,660 lifetime allowance charges, a significant increase from the 8,820 charges in the previous tax year.
In the spring budget, Finance Secretary Jeremy Hunt increased the annual allowance to £60,000 and scrapped the long-term agreement.
“This all goes to show that before Jeremy Hunt increased AA to £60,000 and effectively scrapped the LTA from April 2023, there was a rapid increase in the number of pension savers breaching both thresholds – most likely due to The uptake of financial advice is low in these potentially complex areas,” said Henrietta Grimston, associate director of financial planning at wealth management firm Evelyn Partners.
“In the case of the LTA – which has been frozen since 2021 – savers may be penalized not only for saving too much, but also for the investment performance of their savings. With the current long-term agreement effectively scrapped, this particular The danger has been eliminated for the time being.”
However, Grimston added that it remained to be seen “whether the Treasury’s relaxed approach to pension taxation persists” amid a “volatile political landscape”.
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