This is the view of Kate Smith, head of pensions at Aegon. She comments: "These figures represent just the start of a trend, as furlough has continued and job losses are increasing.
"The longer-term impact of this could seriously affect the financial wellbeing of some people by putting a massive dent in people’s retirement plans and ability to save for the future."
She explains that although withdrawals during the first half of 2020 have been "cautious" among those over 55 – according to the ONS – she worries this may have changed in the second half of last year, as the pandemic continued and the economic conditions worsened.
Ms Smith adds: "Pensions are designed to provide an income throughout retirement, and reducing the amount of income withdrawn during a period of investment market downturn could be important for the longevity of the pension pot.”
Aviva has also charted the course of DC pension investment with some concern. As the pension provider's graph (below) shows, there is a stark drop-off in contributions and a slowdown in membership, coinciding timewise with the first UK lockdown.
Alistair McQueen, head of savings and retirement at Aviva, says: "The impact of the pandemic on pensions has resulted in an alarming 11 per cent drop in total private sector occupational defined contributions by employees. This will mean a poorer retirement for many. The longer this drop persists, the greater retirement impact will be."
His comments have been echoed by Andrew Tully, technical director at Canada Life, who notes: "The ONS [publication] provides an interesting snapshot of the UK pension system over what has been a turbulent period.
"It certainly presents a number of areas for the industry and government to pay close attention to in the future.
"While it’s good to see that pension scheme membership has remained relatively positive, it’s worrying that employee and employer contributions to DC schemes have fallen.
"As a nation we are already chronically undersaving for our retirement, and as we move out of the coronavirus crisis it’s important we find ways to increase this pension saving back, at least, to previous levels.”
Fee fairness
There was some good news that came out at the same time as the ONS statistics, however, which may well help to alleviate concerns people in workplace schemes may be having.
This was the outcome of the Department for Work and Pensions' review of the default fund charge cap and standardised cost disclosure. In this, the DWP advocated keeping the 0.75 per cent DC pension charge cap, which has been called an important consumer protection by pensions industry commentators.
