Big Fall in Employees Enquiring About and Accessing their Pensions

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HR and People , 19th August 2020

During lockdown, throughout March and April there were big falls in the number of people enquiring about and accessing their pensions as savers resisted the urge to raid their pension pots in the face of financial uncertainty, according to data released recently from the Association of British Insurers (ABI).

Comparisons between April 2019 and April 2020 show:

Queries from customers about their pension fell by a third (31.9%).
People choosing to access their pension as a flexible income (drawdown) fell by 42.2%.
The number of people taking only a tax-free lump sum has halved (53.1%).
The number of people withdrawing all their pension in one lump sum fell by 30.2%.
The number of people buying a guaranteed income for life (annuity) fell by 56.3%.

There was also a fall comparing March 2019 to March 2020, when stock market volatility increased:

Queries from customers about their pension fell by 3.2%.
People choosing to access their pension as a flexible income (drawdown) fell by 15%.
The number of people taking only a tax-free lump sum fell by 29%.
The number of people withdrawing all their pension in one lump sum fell by a fifth (20%).
The number of people buying a guaranteed income for life (annuity) fell by (36%).

The fall from March 2020 to April 2020 was bigger than the corresponding change last year.

As we ease out of lockdown, it is expected that withdrawal rates will begin to increase due to pent-up demand and as the financial need increases as the furlough scheme unwinds. The ABI is urging people who are considering accessing their pension to seek impartial financial guidance from Pension Wise or regulated financial advice, and to ask their provider about their options.

Rob Yuille, Assistant Director, Head of Long-term Savings at the Association of British Insurers 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.”