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Post pension freedom Lamborghini withdrawals have not materialised, says AJ Bell

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Analysis of withdrawal trends at AJ Bell during the first year of pension freedom shows that full withdrawals represented just 1 per cent of all withdrawals made and the majority (77 per cent) of full withdrawals were less than GBP30,000 in value.

The average full withdrawal was just under GBP25,000 and only 12 per cent of people who did not take professional financial advice when making a full withdrawal sought guidance from Pension Wise, the Government service set up at the time pension freedom came into effect.

This data shows that most people are using the pension freedom rules exactly how they were intended – to provide an ongoing and sustainable income in retirement via partial withdrawals or income drawdown.  The average partial withdrawal made by AJ Bell’s customers was just 1.86 per cent of their overall fund value. 

AJ Bell has also seen a significant uptake of the more flexible death benefit rules.  Since the pension freedoms came into effect, 42 per cent of beneficiaries receiving pension death benefits from AJ Bell’s pensions have elected to keep the inherited funds in a pension and use the new flexible income drawdown rules. 

Billy Mackay (pictured), marketing director at AJ Bell, says: “The stampede for the exit door to fund frivolous purchases following pension freedoms has not materialised. The sports car driving pensioner was a nice image but the reality of tax charges on large withdrawals has kept people’s feet on the ground.  Our experience has been that people are using the new flexibility to produce a steady, tax efficient income stream in the form of partial withdrawals where they don’t want their hands tied by an annuity. 

“It is also apparent that people are utilising the new death benefit rules to keep inherited pensions in drawdown which enables them to pass any residual funds down through the generations upon second and subsequent deaths.”

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