Fewer People Cashed In On Pensions Despite Virus, ABI Says

By Martin Croucher
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Law360, London (July 27, 2020, 6:40 PM BST) -- The number of people drawing down their pensions has fallen by nearly half during the lockdown, insurers said, confounding fears that a period of financial hardship could trigger a raid on retirement savings.

The Association of British Insurers said Sunday that the number of people accessing their pensions as a flexible income fell by 44.2% in April, compared to the same month last year.

Similarly, the number of people withdrawing all their pensions in a single lump sum fell by 30.2% in 2019, the ABI said.

The numbers come after several warnings from the ABI during the lockdown urging people not to tap into retirement savings.

"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 labor market uncertainty," said Rob Yuille, the head of long-term savings at the ABI.

"So far, this concern couldn't be more wrong," he added. "Instead, customers have been holding off in large numbers."

Britain introduced rules in 2015 that gave long-term savers age 55 and older more freedom to move all of their cash out of their savings, or withdraw up to 25% of it without paying tax.

According to statistics from HM Revenue and Customs in October, more than £30 billion ($38 billion) has been withdrawn from pension schemes since the reforms were introduced.

The ABI argued in February that the government should again review the freedoms, saying they cause more people to fall into poverty when they hit retirement age.

The trade body said Sunday that it expects withdrawal rates to begin to increase as the country eases out of lockdown, adding that there could be a greater "financial need" when the furlough scheme ends.

The government is currently paying 80% of the salaries of roughly 9 million U.K. workers under the Coronavirus Job Protection Scheme, but market commentators believe there could be widespread redundancies when the protections are withdrawn in October.

--Editing by Marygrace Murphy.

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