Full pension pot withdrawals jump 94% as lockdown eased
The number of people withdrawing all of their pension in one lump sum increased by 94% in the six months to September once lockdown restrictions started to ease.
In the same period last year, the number of people withdrawing all their pension money increased 51%, according to statistics from the Association of British Insurers (ABI).
It noted a big jump in pension savers accessing pots after a pause in activity during the first coronavirus lockdown earlier this year.
The ABI said the number of people accessing their pension as a flexible income increased 56% between April and September, though withdrawals are still down on 2019 levels.
The number of people buying a guaranteed income for life (annuity) increased by 41% while the number taking only a tax-free lump sum increased 55%.
Commenting on the rise, the ABI said people held back from withdrawals when stock markets were volatile while others may now need access to the cash after a change in circumstances.
However, compared to last year, it appears that many pension savers are still resisting the urge to raid their pension pots in the face of continued financial uncertainty.
Rob Yuille, head of long-term savings at the ABI, said: “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.”
He lists these top tips on things to consider when withdrawing money from your pension:
- Familiarise yourself with the pensions freedoms so you are aware of your options. You can do a lot more with your pension pot than previously. What risks are you willing to take?
- Consider the amount of money you will need each month to maintain your lifestyle. Do you want to have annual holidays? Do you still have a mortgage to pay off? What other sources of income do you have, and do you need your pension to keep up with inflation? Could you consider working for longer?
- Think about costs later in your retirement. Care needs are not a subject we are comfortable thinking about but it is important to have conversations about it with your family, as well as powers of attorney, wills and inheritance.
- Your health and life expectancy. We often vastly underestimate this, but evidence shows we are mostly living longer, with a growing variation in healthy life expectancy. If you have a partner, do you need to provide for them financially after you die, or are you relying on them?
- Use sources of help: the government’s pensions tracing service if you think you might have a lost pension pot; a Midlife MOT from the Money and Pensions Service or your employer; and Pension Wise, or a financial adviser.