Over-55s forced to dip into pension pots as pandemic bites
Over-55s have increasingly been dipping into their pension pots due to the financial pressures of Covid-19, new HMRC stats have shown.
Nearly 350,000 people accessed their nest egg between July and September, roughly 20,000 more than the same period last year, according to the data.
HMRC said this could be because the pandemic has led to older workers tightening the purse strings amid rising unemployment and reduced incomes.
Contrary to usual trends, more savers resorted to drawing from their pensions over the summer than for the previous three months.
Jon Greer, of pensions firm Quilter, said the rise suggested more people need additional cash to see them through the crisis - and warned that worse could be to come.
“It is likely many people might need to dip into their pension to cover bills and expenses, particularly during the early part of next year when mortgage and credit holidays are due to come to an end,” he added.
A number of coronavirus support schemes come to an end on Oct 31, while tighter lockdown restrictions have put added pressure onto businesses.
The news comes after reports that older generations are increasingly supporting younger relatives who are more likely to suffer from the financial consequences of the pandemic.
Many older workers have been forced out of the workplace, as there were 122,000 fewer workers over the age of 65 in October than there were at the beginning of the year, according to the latest labour market figures from the Office for National Statistics.
Previous research by the Resolution Foundation, a think tank, found that some households have been able to cut down on spending by working from home while others have struggled because of unemployment or reduced income.
Under the pension freedoms those over the age of 55 can access their pension pots, subject to tax rules.
Despite the increase in withdrawals, the average amount withdrawn per person in the past three months fell by seven per cent when compared to last year to £6,700. The total value of flexible withdrawals since the rules were introduced in 2015 is more than £37bn.
Steven Cameron, of Aegon, another pension company, warned that those who withdraw too much could risk running out of money.
“Pensions are designed to provide an income throughout retirement and reducing the amount of income withdrawn during a period of downturn could be important for the longevity of the pension pot,” he said.
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