...but fall in the average amount withdrawn.
The government this morning published figures showing a 6% year-on-year rise in the value of flexible withdrawals from pensions in the three months to December last year, from £2.2 billion to £2.4 billion.
There was a 10% rise in the number of people withdrawing from their pension, to 360,000, compared with 327,000 who withdrew in the same period in 2019. There was a 4% increase in the number of individual withdrawals on the previous three months.
The last few months of the year typically see a slight drop in the number of withdrawals, the update said.
However, the average amount withdrawn fell slightly by 3% to £6,600 compared with £6,800 in the same period a year earlier, suggesting retirees were taking a cautious approach in the final months of last year, over the period covering the November lockdown.
There is usually a peak in the value of withdrawals in the second quarter of each year, with data going back to 2016, however last year, in the months of the first lockdown, withdrawal amounts did not follow this pattern.
Becky O’Connor, Head of Pensions and Savings at interactive investor, said: “The rise in the number of pension withdrawals could indicate that some are having to turn to their pension to make up for lost income from earnings. Equally, it could reflect an increase in the number of people able to take advantage of the chance to draw from their pension.
“We know that many older workers approaching or past state pension entitlement age have also lost income or had to give up work since Covid-19 first struck.
“The risk for older people who are perhaps having to use their pension money earlier than planned is that their pots could run dry sooner than expected.
“However, the decline in the average value of the amount withdrawn suggests that people are being cautious about how much they access, too.
“Trying to maintain a sustainable pension is hard enough at the best of times. The difficulties that the past year has thrown at us have made this task harder than ever.”
“The pandemic and associated lockdowns have rocked our finances with very uneven outcomes. Some have built up savings reserves in the absence of normal spending opportunities, but on the other side of the coin, the pandemic response has caused a drop in income for other households.
“This very divided impact also applies to the retired generation, as well as the working population. For all, it has highlighted a need for healthy reserves to cover unexpected events.”
Notes to editors
- HMRC Flexible payments from pensions: https://www.gov.uk/government/publications/flexible-payments-from-pensions/flexible-payments-from-pensions
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