People saving more and withdrawing less during lockdown - PensionBee

Lockdown has had a “significant impact” on savers’ financial habits, according to PensionBee, as consumers begin to save more and withdraw less in an “era of uncertainty”.

Research by the firm revealed that whilst the overall proportion of people making pension contributions fell slightly from 19 per cent (April 2019) to 17 per cent, the average monthly pension contribution increased by 43 per cent.

This equates to an almost £500 increase in the average contributions for April, rising from £1,225 in April 2019 to £1,752 in April 2020.

Meanwhile, the proportion of customers making withdrawals had decreased by 33 per cent year-on-year, with just 8 per cent of customers aged 55 and over withdrawing from their pension in April 2020.

The average pension withdrawal has also fallen by a quarter, with savers withdrawing an average of £8,200 in the past month, compared to a £10,900 monthly average in 2019.

The findings follow a record number of people taking flexible pension payments in Q1 of 2020 compared to 2019, with the average amount withdrawn per individual also showing a decline according to HMRC data.

Industry experts have previously warned of a potential increase in early access of pensions as consumers look to supplement income during the current pandemic, with regulators and government officials urging savers against 'knee-jerk' reactions, such as a DB transfer, that could see them fall victim to a pension scam.

However, PensionBee reported a 24 per cent increase in customers completing their first pension transfer in April 2020, which it stated could signal that customers are using their time in lockdown to "organise their finances", rather than just impulse decisions as warned.

PensionBee chief executive, Romi Savova, added: “It is evident that consumers have become more prudent in an era of increased uncertainty, and where possible they are saving more and spending less.

“Where consumers are no longer spending money on everyday expenses such as commuting and eating out, they are redirecting their disposable income to their pensions.

“For those in retirement who are withdrawing less, prudence may be driven by apprehension about future spending requirements in the context of a weaker economy.

She concluded: “We would encourage customers who have a larger disposable income to continue saving, and for those in retirement to keep as much of their pension invested as possible to ensure they’re well positioned to benefit from the eventual economic recovery.”

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