24 Aug COVID-19 causes tax-free lump sum pension withdrawals to plummet
New research from the Association of British Insurers (ABI) has revealed that the number of savers opting to withdraw a tax-free lump sum from their pension has dropped more than 53 per cent due to the pandemic.
According to the ABI’s study, when comparing April 2019 and April 2020, the number of people choosing to access their pension as a flexible income fell year-on-year by 42.2 per cent. Comparing the same periods, the number of people withdrawing all their pension in one lump sum also fell by 30.2 per cent.
However, it wasn’t just tax-free pension withdrawals that saw a decline. The number of individuals purchasing annuities fell by 56.3 per cent.
The ABI also found that the number of queries from customers about their pension also fell by nearly a third.
The figures for March 2020, when compared to March 2019, also showed a decline in people taking a tax-free lump sum from their pension.
Comparisons of the two years’ figures reveal that the number of tax-free withdrawals fell by 29 per cent, while the number of savers withdrawing all of their pension in one lump sum fell by a fifth.
These figures suggest that many savers are actively protecting their pension from volatile markets by taking a more cautious approach and waiting for the value of their pension savings to rise again.