There was £2.5bn withdrawn from pensions flexibly in the first quarter of the year, a 19% increase from £2.1bn in the opening quarter of 2019, new HMRC data has revealed.

The latest statistics showed the total value of flexible withdrawals from pensions since flexibility changes in 2015 has now exceeded £35bn.

The first quarter of 2020 also saw 348,000 individuals withdraw from pensions, which was a 23% increase from 284,000 in the same quarter of the previous year, while there has also been an increase in the number of individuals withdrawing compared to the final quarter of 2019 (327,000), which HMRC suggested reflects normal seasonal patterns.

While the total pension freedoms withdrawals continued to show a rise, the data also revealed the average amount withdrawn per individual in 2020’s first quarter had fallen to £7,100, down 3% from £7,300 in the first quarter of 2019.

Since reporting became mandatory in the second quarter of 2016, HMRC said average withdrawals have been falling “steadily and consistently”, with peaks in the second quarter of each year becoming a “noticeable trend”.

AJ Bell senior analyst, Tom Selby, commented: “It’s worth noting the Q1 2020 figures mostly relate to the months before lockdown hit, and so are unlikely to capture any substantive shift in behaviour resulting from Covid-19.

“Given the dramatic impact the pandemic has had on markets and people’s incomes, it will inevitably drive the pension access decisions many people make in Q2 2020 and beyond.

“Independent research commissioned by AJ Bell suggests one in 10 over-55s have already accelerated plans to access their pension as a result of Covid-19. Anyone going down this route needs to think carefully about the sustainability of their retirement income strategy.”

Aegon pensions director, Steven Cameron, suggested there is a “big question” over how the use of pension freedoms will be affected by the coronavirus crisis, both in terms of challenges to individuals’ financial positions, as well as the the “recent and likely ongoing stockmarket volatility”.

“Future data should help us gather a fuller picture of any changes in behaviours,” he added.
 
“For those facing financial difficulty, pension freedoms offer flexibility to ease financial burdens in uncertain times, such as those we are experiencing today.

“However, freedom comes with great responsibility and it is crucial that people understand the risks associated with drawing down their retirement savings which for many need to last a lifetime. For many, it may be better and more tax efficient to use other sources of savings first.
 
“The coronavirus and ensuing market volatility highlights the risks involved and we encourage individuals whether considering or in drawdown to avoid panic measures and to seek financial advice or guidance before making important decisions.”

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