Pension withdrawals rise by 94% as retirees face a ‘double whammy’ of lockdown problems

Pension pots can generally be accessed from the age of 55 under current rules. Pension freedom laws allow people to withdraw from their pensions in many different ways but overindulgence

with this can deplete a person’s retirement funds.

In new figures released today, the Association of British Insurers (ABI) have revealed the number of people accessing their pension as a flexible income had increased by 56 percent between

April and September this year.

In analysing the data, it was found the increase occurred as savers started to withdraw funds after effectively pressing pause at the start of the pandemic.

In comparing data from when restrictions were eased between April and September to when the country was in full lockdown, the following was found:

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In light of these findings, Rob Yuille, the Head of Long-Term Savings at the Association of British Insurers, urged anyone considering accessing their pensions to seek impartial guidance

before doing so: “Government restrictions, stock market volatility and employment prospects are just some of the factors weighing on pension savers’ minds when considering taking money out

of their pension pot.

“Everyone is different and it is important to find the right solution for your circumstances.

“Getting financial advice or guidance can help provide options and clarity on what to do with your savings.

“We welcome the Money and Pensions Service confirming that they will develop a later life checklist for over-50s, especially those facing redundancy or income reductions in light of

Covid-19.”

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Becky O’Connor, the Head of Pensions and Savings at interactive investor, also commented on ABIs research, noting the dangers of tapping into a pension too early: “Right now, it seems there

is more risk of people making potentially damaging decisions with pensions than ever.

“The global pandemic has been a double whammy for people in or approaching retirement who have the option of accessing their pension.

“Not only have their returns been all over the place through stock market volatility, causing anxiety and making it hard to know whether to withdraw, to add insult to injury, but some have

also faced difficulties maintaining other sources of income, causing them to make untimely pension withdrawals that could cost them dearly later on.

“Clearly, having more education, guidance and advice would all help people who are facing these life-changing dilemmas with their pension pots.

“However, as the ABI research shows, the cost of financial advice can be hugely off-putting for many people. People also prefer to do their own research, with authoritative information

sources being among the top choices.

“There is a lot of helpful information out there on specialist and government websites.

“While there are occasions when bespoke, personal advice is the right course of action, at present, it does not always reach those who would benefit because it’s not cost-effective for

them.”

“More education and guidance about the options people will face earlier in retirement savings journeys would also help to prevent panicked and costly decisions later on.”

Heeding guidance before taking a pension withdrawal could be crucial for many as a recent analysis from Just Group revealed that accessing pension pots early could cost retirees up to

£40,000.

In mid-October, the firm calculated what could happen to a 55-year-old person thinking of taking their full tax-free cash amount from a £100k pot, assuming returns of five percent after

charges and a guaranteed income for life (annuity) rate of four percent:

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