Pension freedom withdrawals have continued to fall year-on-year, a new survey from AJ Bell has revealed.
According to the pensions specialist, withdrawals fell to 4.4% of private retirement pots, down from 4.7% the previous year and 6.6% in 2017. The average annual withdrawal was £6,694.
In total, pension freedoms withdrawals now account for nearly a third (32%) of people’s total income, with over two thirds (70%) of those surveyed saying they represent half their income or less.
However, Tom Selby, senior analyst at AJ Bell, warned that the recent Coronavirus sell-off will require hundreds of thousands of investors to review their retirement income strategies to ensure they are still sustainable.
Selby said: “Although it is difficult to judge the sustainability of withdrawals without knowing people’s individual circumstances, a market characterised by people taking an income of between 4 and 5% who tend to have multiple sources of income may appear of little concern. However, the coronavirus sell-off has changed everything, ripping a double-digit hole in millions of savers’ pension plans.
“While those who are building a retirement pot should have decades for their funds to hopefully recover value, people drawing an income already will likely have to adjust their spending expectations.”
Investors in the early years of retirement who took significant withdrawals from their fund just as the current crisis hit will need to be particularly careful, according to Selby, with a combination of big withdrawals and negative investment performance potentially wreaking havoc with retirement plans.
