Older savers have been resisting temptations to dip into their pensions during the coronavirus lockdown, figures from insurers suggest.
In April, queries from customers about their pension fell by nearly a third (31.9%) compared with April 2019, according to the Association of British Insurers (ABI).
The number of people withdrawing all their pension in one lump sum fell by 30.2% and the number of people drawing down their pension as a flexible income fell by more than two-fifths (42.2%).
The ABI said it expects pension withdrawal rates to increase as the 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.
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 uncertaintyRob Yuille, Association of British Insurers
The body is urging 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.
Rob Yuille, assistant director, head of long-term savings at the AB,I 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.
“So far, this concern couldn’t be more wrong. Instead customers have been holding off in large numbers.
“The pandemic is a harsh reminder of the uncertainty of how long your retirement might last, what it will look like and what it will cost. More than ever it has shown that when it comes to making decisions on your pension, you should get expert help.”
There may be a temptation to consider taking drastic measures like reducing or opting out of monthly pension contributions. This should only ever be an absolute last resortPete Glancy, Scottish Widows
Pete Glancy, a pensions expert at Scottish Widows, said that for anyone who is still over a decade away from retirement, the volatility seen in pensions values in recent months may turn out to mean very little.
He said: “In fact, over the long-term, a downturn can provide an opportunity for savers to pick up equities at terrific value and could actually boost retirement coffers.
“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.
“More broadly, as people look to readjust to the new normal, saving for retirement may also understandably end up taking a back seat. Short-term financial needs may take priority for many and there may be a temptation to consider taking drastic measures like reducing or opting out of monthly pension contributions.
“This should only ever be an absolute last resort – as the temporary relief could do long-term damage to your finances.”
Helen Morrissey, a pension specialist at Royal London, said: “This research shows that people are pressing the pause button on making long term retirement decisions in the current environment.
“This is not surprising given stock market volatility and concerns about redundancies.
“However, as time goes on people will need to make decisions to help them navigate the increasingly complex environment – there has never been a greater need for advice.”
Tim Gosling, head of policy at the People’s Pension, said: “It’s encouraging that people appear to have used the Government’s financial support package rather than rushing to access their irreplaceable pensions savings early.
“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.”