Industry commentators have said that the figures suggest pension savers are being more sensible in light of the Covid-19 pandemic.
Even so, the figures suggest pension withdrawals has now become a very significant part of the UK pensions landscape since the Pension Freedoms arrived in 2015 with withdrawals now topping £37bn.
MPs on the Works and Pensions Committee also recently announced they would review the Pension Freedoms.
HMRC said that Q2 2020 saw 340,000 individuals withdraw from pensions, a 1% increase from 336,000 in the same quarter of the previous year.
However, there was a drop in the number of individuals withdrawing compared to the previous quarter Q1 2020 (348,000) – which was “contrary to normal seasonal patterns.”
HMRC says that withdrawal numbers typically rise in Q1, before peaking in Q2 with the beginning of a new tax year.
The change in behaviour “may be attributable to the impact of the Covid-19 pandemic”, said HMRC.
The average amount withdrawn per individual in Q2 2020 was £6,700, falling by 18% from £8,200 in Q2 2019.
Since reporting became mandatory in Q2 2016, average withdrawals have been falling steadily with peaks in the second quarter of each year becoming a noticeable trend however no peak was seen in Q2.
Key highlights from the latest stats (available here) show:
- 340,000 people made 827,000 withdrawals totalling £2.28bn between April and June
- The last 3 months saw the number of people withdrawing remain the same, but the amount withdrawn dropped by 17% yoy
- Average withdrawal per member is at a low of £6,706, down 40% from the £11,132 per member when reporting became compulsory from April 2016.
Nathan Long, senior analyst at Hargreaves Lansdown, said: “Rather than panic and rush for the exits, savers have been restrained and reduced their withdrawals to offset falling investment values and dividend payments. Payouts are now the lowest per person since records were introduced. It’s exactly the approach savers should take, using their emergency cash reserves to supplement income from their pension in the tough times.”
Steven Cameron, pensions director at Aegon, said: “Reassuringly (the figures) show no evidence of the feared rush to take money out of pensions in response to financial challenges people are facing as a result of Covid-19.”
Helen Morrissey, pension specialist at Royal London, said: “Today’s figures show the impact of Coronavirus with many people effectively pressing the pause button on their retirement plans.”
“However, we expect this to be a short term blip - with £37bn withdrawn since the advent of Freedom and Choice in 2015 it is clear to see there remains a strong appetite for pension flexibilities.”