Since the pension reforms were introduced in April 2015, over £2 billion of pension funds has been cashed in, according to statistics. Providers say the vast majority of funds that have been wholly encashed were under £30,000 and most encashments have been by people age 55 to 60. Though older people also have the right to encash, they appear not to be doing so.
As expected, it’s not those who have saved hard into a pension as part of their retirement planning and made the most of the tax efficiency of pensions who are accessing them thus far.
Experts say pension fund encashments for the year are likely to top £5 billion, but this is still a very small fraction of the total sums held in funds by individuals.
As I expected, when people realise they will pay a lot of tax (see my other blog post) if they cash in the whole of their fund, they tend to change their minds. Most people cashing in small funds will pay very little if any tax. But it is always worth checking if a pension plan has valuable guarantees attached that would be worth keeping.
Get in touch if you would like a cup of coffee and a second opinion on your pensions.