Over 25% of lump sum pension withdrawals are to ‘save elsewhere’. Nearly one in five over-55s with a private pension withdrew a lump sum during 2019, with the most popular reason for doing so being to put the money into a savings account, new research has shown.
The analysis, commissioned by Canada Life, revealed that one in four people chose to withdraw an average of £18,400 to save elsewhere, with a further one in five people withdrawing an average of £10,000 to deposit in the bank.
Meanwhile, one in five people chose to focus on making home improvements, with pension withdrawals averaging around £11,600.
Whilst Canada Life stipulated that the “highest value priority for the pension cash” was to reinvest the money into stocks and shares, this option was chosen by just under one in ten people, with an average investment of £34,700.
However, the findings suggested that there may be a change in trend on the horizon, with just 6 per cent of over-55s stating that they had already taken some cash or plan to do so at some point in 2020.
This compares to nearly 90 per cent who stated that they would not be dipping in to their pension over the next year.
Canada Life technical director, Andrew Tully, argues that these findings show people being “incredibly diligent and at first glance sensible” with their plans for pension cash, rather than painting a picture of “frivolous spending”.
“However,” he clarified, “simply withdrawing taxed lump sums from a very tax efficient pensions environment to put on deposit or save into stocks and shares makes no sense whatsoever.