There was a spike in people accessing their pensions during the summer, after many “pressed pause” at the beginning of the pandemic, the Association of British Insurers (ABI) has found.
Since the first lockdown in March, the number of people tapping into their pension as flexible income increased by 56%, which the ABI attributed to a large proportion of them putting off withdrawals to wait out market volatility.
A rise of 55% in those taking only a tax-free lump sum was also recorded.
But the biggest change was the number of retirees withdrawing their full pension, which surged by 94% during the summer, compared to the March-May 2020 period.
Q3 2020 also registered a significant increase (41%) in people buying guaranteed income for life annuities, the association found.
But, overall, numbers still remain below the levels recorded in 2019.
A ‘tempting’ option
Helen Morrisey, pension specialist at Royal London, is not surprised that retirees are turning to their pensions after three months of waiting for markets to recover.
“It makes sense that, after delaying making retirement decisions in the early days of the pandemic, people are now exploring their options.
“People have gone through a lot in recent months, with many seeing themselves or family members going through financial shocks, such as redundancy or furlough.
“While it may be tempting to access pensions to plug any income gaps, care must be taken to make sure that decisions taken now do not impact your chances of having a decent income in retirement.”
Rob Yuille, head of long-term savings at the ABI, added: “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.”