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Law360, London (April 17, 2020, 3:27 PM BST) -- Long-term savers hit by financial woes caused by the coronavirus lockdown should think before cashing in their pensions early during a "worrying and uncertain time," an insurance trade body warned on Friday.
The Association of British Insurers said people should consider the long-term impact on savings if they are intending to dip into their retirement pots early, which they can do from the age of 55 under pensions freedom rules.
The trade body also cautioned savers not to allow themselves to be pressured into transferring money into schemes that promise high returns but which are potentially run by scammers.
"Rushed financial decisions are rarely the right ones, even at this worrying and uncertain time," Yvonne Braun, a director of policy at the association, said. "Lockdown will not last forever, but the decisions you make today about your pension could impact on your standard of living for years to come."
Britain introduced rules in 2015 which gave long-term savers more freedom to cash in pension pots from the age of 55. According to statistics from HM Revenue and Customs in October, more than £30 billion ($37.5 billion) has been withdrawn from pension schemes since the reforms were introduced.
The ABI has called for the pensions freedom age to be raised to 57, as more people transfer savings out of gold-plated final benefit savings plans or lose their money to criminals.
"Don't fall victim to scammers," Braun said. "Shun any unexpected approaches, and remember: if a deal seems too good to be true, it almost always is."
The Financial Conduct Authority and the Money and Pensions Service have already warned over the rise of pension scams connected with the current crisis.
The regulators said this month that savers may be particularly concerned about their pensions because of volatility in the stock market caused by the impact of COVID-19 on businesses. Scammers could exploit such anxieties by trying to convince consumers to transfer their pensions savings
"For those on the point of retiring, the impact of the virus on the financial markets and therefore on pension savings has been damaging," Charlotte Jackson, head of pensions operations and consumer protection at the Money and Pensions Service, said at the time.
- Additional reporting by Lucia Osborne-Crowley. Editing by Ed Harris.
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