Team Money Savings Advice
Britain's pensioners resisted the temptation to raid retirement savings over lockdown, causing pension withdrawals to fall by as much as 53%.
Figures released over the weekend by the Association of British Insurers (ABI) show that savers have been cautious about tapping into their pension since the UK plunged into lockdown in March- but the association warned that resolve could run thin if things don’t improve soon.
"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" said Rob Yuille, ABI assistant director and head of long-term savings.
Instead, the number of savers cashing in a tax-free lump sum on their pension fell by more than half compared to 2019, while the number of people using the drawdown facility on their pension dropped by one third.
Yet despite the restraint showed by savers in early months of the COVID-19 crisis, things could change as the government’s furlough scheme wraps up.
More 9.4m workers have signed on to the income support scheme since it was rolled out on 1st March to help workers get through the lockdown.
Employees in their 60s are more likely to have been furloughed than their colleagues in their 40s and 50s.
Around one-quarter of 65-year old women in work are on furlough, along with about 35% of pension-aged men.
As the support scheme is set to tail off at the end of October, these workers could be left out of pocket- and potentially look to their pension saving to plug the gap, says ABI.
In May, the UK’s largest pension fund, Nest, told the Financial Times that it squirrelled away more than double its normal cash reserve to help combat the risks that could come its way in a Coronavirus economy.
Even though the UK is starting to ease out of lock-down, many financial bigwigs agree that the road to economic recovery could be a long one.
In a recent survey from Bank of America, only 10% of fund managers said they expected a 'V-shaped' recovery from Coronavirus recession.
This could leave pensioners in a tight spot for the long-haul, if furlough or unemployment creates a gap in their income.- and many may finally be tempted to cash in on retirement savings.
But despite the rocky road ahead, the advice from ABI’s Rob Yuille is to hit pause and seek expert advice before opening the floodgates on lifetime employment savings:
"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."
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