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Flexible pensions cash may be a major contributor to the rise in savings deposits – rather than a rise in consumers saving more, new research has suggested.


Retirees withdrawing cash appeared to be acting with caution due to market volatility and were found to be using savings accounts as a “haven”, according to the latest statistics. 



HMRC revealed that both the volume and value of flexible payments from pensions has hit a new high.

Between April and June this year, £2.75bn was withdrawn from pensions flexibly, with 760,000 payments made.

Over the same quarter, statistics from the Bank of England noted £7.5bn was deposited into accounts that are accessible without penalty, which includes easy access accounts.

According to the latest research by Moneyfacts.co.uk, savers who have waited until now to open an account may have missed the boat on the most lucrative easy access rates, as they are now on the decline. 



 

Moneyfacts says retirees who want frequent access to use their savings pot as a source of income will “need to be mindful that the best easy access deals can apply withdrawal restrictions or require savers to open the account online”.

Savers will also find that the market average rate of 0.64% is less than the Bank of England base rate, so there are still many accounts to avoid due to poor returns.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Retirees may be withdrawing cash from their pensions for various reasons, either to plug a debt gap, boost disposable income or even to reinvest.

“There are signs that the cash could be going into easy access accounts, away from stock market volatility and within easy reach. In recent months, several providers have cut their easy access rates, plus some of the top deals include withdrawal restrictions.

“The downside to choosing an easy access account is the return, which is variable and may well drop should we see a base rate cut before the year is out.

“As the average easy access rate stands at just 0.64%, it’s clear to see that there are much worse rates out there for savers than can be found in the top rate tables.

“Indeed, the Flexible Saver from HSBC pays a disappointing 0.15% – 10 times less than the top rate in the market today on offer from Virgin Money, which pays a rate of 1.50% on its Double Take E-Saver.

“It is slightly worrying to find such a large rise to both the volume and value of pension cash withdrawals, hitting a new record since pension freedoms were introduced. If retirees take too much cash out of their pensions from the age of 55, they may end up with little provision for the future, which they are unlikely to be able to recoup. 

“Seeking independent financial advice, both when withdrawing cash and choosing a product in which to invest, is essential during a period of economic uncertainty.

“Taking out an easy access account may be an easy choice, but it doesn’t necessarily mean it’s the right one.” 

The Pensions Regulator has fined a firm £350,000 for failing to fully comply with its pension duties.
Scottish Widows has been ordered to compensate a client after a rule change around overseas pension transfers led to him being hit by an unnecessary 25% per cent tax charge.
On 1 November we will see the first big changes come into force as a direct result of the Retirement Outcomes Review (ROR) – the FCA’s big piece of work on the post-pension freedoms world. Although the ROR focuses primarily on non-advised clients there are knock-on effects that will be felt by all clients, and their advisers too.

The retirement outcomes review continues to cause fun and games in the world of pensions. Particularly for those with more complex pension products.

Transfer values rose during July 2019, while the number of DB transfers also increased, according to XPS Transfer Watch, which monitors how market developments have affected transfer values for an example member, as well as how many members are choosing to take a transfer value.
A pensioner aged 76 who thought he was not entitled to the state pension has received a backdated windfall of £132,800 after intervention from an equity release adviser.
Savers withdrew £2.75billion flexibly using the pension freedoms in Q2 2019, up 21% compared to a year earlier, new figures have revealed.
The Pension Scams Industry Group (PSIG), the voluntary body set up to support trustees, providers and administrators in combating pension scams, has appointed Tommy Burns as deputy chair.
National advisory group LEBC has seen the pension pots of clients buying an annuity grow for a sixth successive year.
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