Pension withdrawals by those aged 55+ surged to £12.9bn in 2022-23, a sharp increase from £11.2bn in the previous year and £9.3bn in 2020-21, according to statistics from HMRC.
The most recent private pension statistics from HMRC also reveal that average taxable withdrawals rose by 18 per cent in Q1 2023 to £6,600 per person, for a total of £3.4bn, or 17 per cent more than in Q1 2022, taken out by 519,000 people in 1.2 million payments.
Additionally, contributions reached record highs in 2021-22, totalling £11.9bn, up from £11.7bn the previous year. The value of contributions from self-employed workers rose from £2bn to £2.3bn as well.
Due to Covid-19’s effects on working and retiring, 7.5 million more people are now contributing to personal pensions. Contributors who are self-employed went up from 330,000 to 340,000, a small gain.
Costs associated with National Insurance relief and pension income tax remained at £48.3bn. The amount of contributions above the Annual Allowance increased from 43,870 to 53,330, totalling £1.2bn. The total cost of the Lifetime Allowance charges grew to 11,660, or £497mn.
PensionBee director of public affairs Becky O’Connor says: “People are increasingly benefiting from pensions either by choice or because salary increases are resulting in a rise in contributions. However, the apparent increase in the number and value of withdrawals is concerning – the risk is that people take more out to cover the rising cost of living but don’t leave enough in their pensions to get through their whole retirement.
“It’s also a little disappointing not to see a bigger rise in the number of self-employed people opting to pay into a pension and a shame to see so many being caught out by charges for going over their allowances in previous years.
“The Annual Allowance has now increased from £40,000 to £60,000 and the Lifetime Allowance has been abolished, so the number of people being hit by these charges should drop significantly in future data. Nevertheless, as wages rise, it’s possible that more people could be dragged over the Annual Allowance – particularly those who are paying in more than the minimum, paying bonuses or inheritance money into a pension or those with particularly generous employer schemes.”
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