• Some £2.3 billion was withdrawn flexibly from pensions between April and July as COVID-19 took its grip on the UK, according to the latest data published today by HMRC (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/904548/Pension_Flexibility_Statistics_July_2020.pdf)
• This figure is down 17% compared to Q2 2019 when £2.8 billion was withdrawn flexibly from retirement pots, suggesting many people chose to either pause access or reduce their income as markets plummeted
• While the number of people accessing their pension year-on-year increased marginally to 340,000, this number was down from 348,000 versus Q1 2020 – contrary to patterns seen since the pension freedoms launched in 2015
• The average amount withdrawn per individual in Q2 2020 was £6,700, down 18% from £8,200 in Q2 2019
Tom Selby, senior analyst at AJ Bell, comments:
“The start of the financial year is usually peak pension freedoms season, with savers taking advantage of a fresh set of income tax allowances to withdraw more money from their pensions.
“However this year was like no other we have seen, with the UK economy forced into lockdown and markets plummeting as a result of unprecedented uncertainty caused by the COVID-19 pandemic.
“In the face of this, savers appear to have once again demonstrated their common sense, with significantly less money being withdrawn flexibly from pensions compared to the same period last year and fewer people accessing their retirement pot versus the previous quarter.
“This runs counter to previous trends and suggests that, when faced with the ultimate retirement income test, many people were ready to pause or cut withdrawals in order to keep their plans on track.
“For those taking an income while staying invested in drawdown – and particularly people in the early years of retirement - it is absolutely critical they stay engaged and are prepared to adjust withdrawals if markets plunge in order to stay on a sustainable path.
“Ploughing on regardless is a highly risky strategy and could result in you running out of money early.”
