Unseasonal rise in number of people withdrawing from pensions

by Rebecca O'Connor from interactive investor |

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Research suggests greater need for cash among older people. We explain why.

HMRC published flexible payments from pensions statistics this morning (Oct 30), showing a rise in the number of individuals withdrawing from their pensions both compared with the previous quarter and the same period a year ago.

The Revenue said that the 2% rise in the number of people withdrawing from their pensions between July and September compared with the second quarter of 2020 was “contrary to seasonal patterns” and “may be attributable to the pandemic.”

Compared with the same quarter last year, there was a 6% increase in the number of people withdrawing from their pensions (347,000 compared with 327,000 in the three months to September in 2019). 

However the figures suggest that although more people were accessing pension cash, individual withdrawals in the last quarter were £500 lower per person compared with the value of withdrawals in the same period last year, at £6,700 per person, compared with £7,200 per person in the same quarter in 2019.  

Becky O’Connor, Head of Pensions and Savings at interactive investor, said: “The increase in the number of people turning to their pension pots this year suggests that more people need to access their pension pots to meet living costs. 

“Some older people may also be accessing cash to help children with things like first home deposits, as continued house price growth together with tighter mortgage lending has made getting on the ladder more challenging.

“As our Great British Retirement Survey 2020 found, 21% of those who are not- retired but are able to access their lump sum, had used some of it to help adult children onto the property ladder, up from 14% last year.

“However, those withdrawing from their pensions have been withdrawing less this year, either because their living costs have gone down during pandemic restrictions, or because they are exercising more caution over the amounts they take out, given possible falls in the value of pension investments as well as concern over their ability to continue to work or find work in the coming months. Or it could be a bit of both.”

The interactive investor Great British Retirement Survey 2020 also found that 1 in 5 people approaching retirement expect to carry on working and the same proportion of 66 to 71 year olds said they would hold on to existing jobs. About a third of all age groups are now unsure if they will be able to retire as planned, following the pandemic.

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