Savers have been resisting the urge to raid their pensions pots during lockdown, according to the Association of British Insurers (ABI).
April saw a big fall in the number of people enquiring about their pension pot, new data released by ABI showed a drop of nearly a third (31.9%), compared with April last year.
The number of customers drawing down their pension as a flexible income fell by more than two-fifths (42.2%), but the number of people taking only a tax-free lump sum halved (53.1%), whereas customers withdrawing their pension in one lump sum fell by 30.2%.
Insurers urged people who are considering accessing their pension to seek impartial financial guidance from Pension Wise, which is available to the over-50s, or seek regulated financial advice, and to ask their provider about their options.
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Rob Yuille, assistant director, head of long-term savings at the ABI, said: “As Covid-19 struck there was a fear in the industry and in Government that a pensions panic would hit, with mass pension withdrawals out of fear of stock market volatility and labour market uncertainty.”
“Markets go up and they go down. It can be scary, but it is entirely normal.”
“It’s important to remember that pensions are long-term investments and are designed to gain from the higher performance and volatility of shares when you are a long time from retirement,” said Pete Glancy, a pensions expert at Scottish Widows.
The volatility seen in pensions values in the last few months could provide an opportunity for savers to pick up equities at “terrific value” and could help boost their retirement package.
ABI said it expects pension withdrawal rates to rise as lockdown eases, due to pent-up demand being released as people had previously put plans on hold, and as the financial need increases as the furlough scheme unwinds.
Trends indicate that people have been using the government’s financial support packages rather than accessing their irreplaceable pensions savings early.
Tim Gosling, head of policy at the People’s Pension, said: “It remains to be seen whether there will be an increase in people accessing their retirement pots once schemes, such as furlough, come to an end but accessing savings should always be a last resort.”