Pensioners hit pause on lump sum withdrawals

Pension savers over the age of 55 have cut back on the amount of money they are withdrawing from their pot since the start of the pandemic.

Nathan Long of Hargreaves Lansdown, the investment shop, said investors were taking a practical approach to recent stock market falls.

The average withdrawal per person fell by 6pc in March compared with a year earlier, while the number of oneoff lump sum payments from pensions dropped by 7pc.

“Dipping into cash savings to supplement lower drawdown payments during tougher stock market conditions is a really sensible approach,” Mr Long said.

March and April are typically busy months for withdrawals as people look to maximise their allowances at the end of one tax year and the beginning of the next.

The sharp losses experienced in stock markets since the outbreak of coronavirus have had a significant effect on the value of pension pots.

Pensioners have been urged not to make any knee-jerk withdrawals, as taking money out during weaker markets disproportionately reduces the overall pot size and could quickly erode savings. The figures suggest that pensioners have avoided panic raids to cover any short-term uncertainty.

Maike Currie of Fidelity, the fund manager, said most savers had chosen to keep their money invested. Some due to take tax-free cash had put the transaction on hold.

“If investors can push through the short-term downturn by waiting, and can benefit from an eventual recovery, there is the chance to navigate the choppy waters without eating into your capital,” she said.