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Between April and June this year, £2.75bn was withdrawn from pensions flexibly, with 760,000 payments made.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

SIPPs and SSAS firm Talbot and Muir has warned that a number of SSAS arrangements face “significant costs and delays” on transfers to a more suitable vehicle, such as a SIPP.

SSAS arrangements continue to be popular with advisers and their clients but at times it becomes necessary to transfer to a SIPP, the firm says. 

This may be due to the sale of the sponsoring employer or other personal reasons. 

Talbot and Muir says many who decide to transfer their SSAS benefits but wish to retain certain assets such as property are faced with unjustified charges and administrative delays.

While SSAS’s are not regulated by the FCA the firm said it “seems unfair” clients are not protected by the FCA’s fair treatment of clients Outcome 6, whereby consumers do not face unreasonable post-sale barriers imposed by firms to change product or provider.
 
David Bonneywell, director, Talbot and Muir, said: “We are seeing a marked increase in the enquiries received from IFA’s in respect of SSAS schemes that wish to move to a SIPP. 

“One reason for the contact is that these schemes are facing very high costs to transfer and they are looking to see if there are ways to minimise this. 

“Current administrators appear to be unhelpful with regards to the transfer and are putting restrictive internal red tape in place, in particular when a property is involved. 
 
“A number of advisers are now recommending that the SSAS changes administrator and professional trustee, and then effects a transfer to a SIPP in a cost efficient and timely manner.”

Royal London has warned against a “drastic” proposal to raise the State Pension age to 75.

The Centre for Social Justice, a think tank chaired by former Work and Pensions Secretary and ex-Tory leader Iain Duncan Smith, recently published a report which recommended the change.

The rationale for upping the pension age to 75 by 2035 was cited as “removing barriers” for older employees and “health and wellbeing concerns”.

The report’s conclusion read: “ Removing barriers for older people to remain in work has the potential to contribute greatly to the health of individuals and the affordability of public services.

“Therefore, this paper argues for significant improvements in the support for older workers.

“This includes improved healthcare support, increased access to flexible working, better opportunities for training, an employer-led Mid-Life MOT and the implementation of an ‘Age Confident’ scheme.

“As we prepare for the future, we must prioritise increasing the opportunity to work for this demographic to reduce involuntary worklessness.

“For the vulnerable and marginalised, a job offers the first step away from state dependence, social marginalisation and personal destitution.”

In addition, provided that this support is in place, we propose an increase in the State Pension Age to 75 by 2035.

“While this might seem contrary to a long-standing compassionate attitude to an older generation that have paid their way in the world and deserve to be looked after, we do not believe it should be.

“Working longer has the potential to improve health and wellbeing, increase retirement savings and ensure the full functioning of public services for all. 

But Royal London’s Helen Morrissey cautioned against the approach.

The pension specialist said: “While such proposals will undoubtedly save money, raising state pension age so quickly will cause huge issues for many retirees who will not have been given adequate time to prepare.

“We need to give careful thought to what kind of jobs people in their 70s are able to do and while some people will be able to work on for longer others simply won’t be able to.

“These people will face severe financial hardship if they have not saved enough into a pension to cover the years between leaving work and claiming state pension.”

She added: “The Government needs to think carefully before taking such drastic action.”