Record number of over 65s taking money out their pension to pass on inheritance early  

Driving the growth in withdrawals is the emergence of the ‘Bank of Gran and Grandad’.  

Financial planning September 19, 2019 by Tom Bailey

The number of over 65-year-olds taking lump sum withdrawals from their pension has hit a new high, figures from Salisbury House Wealth show.  

The total number for 2018/19 reached 529,400, a jump of 38% compared to the previous tax year, when withdrawals stood at 384,000.

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The pension freedoms, introduced in April 2015, handed retirees greater flexibility around when and how they access their retirement savings. The pension landscape has changed dramatically, with annuities no longer the default route for generating retirement income.

On the first year of the introduction of Pensions Freedoms (2015/2016), there were around 130,000 lump sum withdrawals. That has steadily increased every year since, withdrawals doubling in the second year of the new policy.


According to Salisbury House Wealth, there are several factors driving the growth of lump sum pension withdrawals.

First, many may be withdrawing to switch part of their pot into cash in order to “de-risk,” fearing recent stockmarket volatility. However, warns Tim Holmes, managing director at Salisbury House Wealth, investors should keep in mind the potential downsides.

He says: “People must be cautious not to de-risk their portfolio too far before or into their retirement as it may negatively impact the growth of their funds.”

Also driving the growth in withdrawals is the emergence of the ‘Bank of Gran and Grandad’ phenomena. Due to house price growth in many parts of the country, an increasing number of grandparents are using cash from lump sum withdrawals to help their grandchildren get on to the property ladder.

According to research from Legal and General, on average, parents and grandparents hand over £24,100 to their children or grandchildren to fund a home purchase. 

Holmes warns that those taking withdrawals should be realistic about how much they will need later in retirement. He says: “It is also crucial that savers do not withdraw too much from their pension pot too early – with rising life expectancies, individuals may be forced to live off their pension for a much longer period of time.”

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OUT OF Brexit - may emerge a Corbyn government - either as head of a coalition or as a majority government - and these sorts of transfers will be hit simultaneously from 2 directions. taking money out (tax free) from a pension will be taxed beyond a nominal point (say 10% reduced from current 25%) and any lifetime gifts will suffer an immediate IHT tax at basic rate or higher.

Also equity release from main residence will be taxed making it unviable.


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