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‘Worrying trend’ as more people access pension cash due to Covid

Paloma Kubiak
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Paloma Kubiak

In the final three months of 2020 amid the coronavirus lockdown, more people accessed their pensions and more money was withdrawn compared to data from the previous year.

A total of £2.4bn was withdrawn from pensions flexibly in the three months to December 2020.

This represents a 6% increase from the £2.4bn withdrawn in the same quarter in 2019.

However, the average amount withdrawn per person was £6,600 – a 3% fall from the £6,800 accessed in the same period a year earlier.

While the total value of withdrawals has increased, the data from HMRC also revealed that more people withdrew from pensions in the period.

In total, 360,000 people accessed their pensions which represents a 10% increase from the 327,000 recorded in the final quarter in the previous year.

HMRC added that in the three months to December 2020, there was a 4% increase in the number of people withdrawing pension cash compared to the previous quarter.

Further, it said that typically, October through to December sees a slight drop in the number of people accessing their pensions, noting that “this change in behaviour may be attributable to the impact of the Covid-19 pandemic”.

In total, since the dawn of Pension Freedoms in 2015 which allows those aged 55+ to access pension savings early, more than £42bn has been withdrawn.

‘More people requiring additional money as lockdown restrictions remain’

Jon Greer, head of retirement policy at Quilter, said: “The final quarter of the year saw an increase in both the total value accessed and the number of individuals taking these payments, compared to the previous three months. The 10% increase of people taking payments from their pensions compared to the same quarter in the previous year is a worrying trend and begins to show more and more people are requiring additional money as lockdown restrictions remain in place across the whole country.

“The impact of Covid-19 now appears to be well entrenched into the figures, but the economic impact of the pandemic is yet to be fully felt by many. While unemployment and redundancies are increasing, we expect these to climb higher as government support schemes are withdrawn and vaccines allow the lockdown to be eased. As such, it will be crucial watching these figures going forward as many are going to feel like they need to dip into their pension to cover bills and expenses.”