Figures from the Department for Work and Pensions (DWP) reveal that 71 per cent of flexible pension withdrawals since the 2015 Pension Freedoms reform have been made by people under 65.
square PENSIONS Money ClinicWill pensions be in the firing line as Reeves looks to plug £40bn hole in finances?
Read More
In total, more than £103bn has been withdrawn. Of that, £36bn came from under-60s and £29bn from people aged 60-64.
Stephen Lowe, group communications director at Just Group, said the trend is well established and worrying.
“Pension flexibility is double-edged – it can be done for good or bad reasons.
“Ultimately, pensions are primarily to provide retirement income, and that money won’t be available in old age if people are using it to subsidise their lifestyle long before retirement.”
Mr Lowe warned that the DWP stats only show part of the picture, explaining that these numbers only give a glimpse of one aspect of pension withdrawal, but do not show the full extent of early access in terms of the number of individuals taking cash and the amounts they are withdrawing.
He said there’s a “massive blind spot” in understanding why people are accessing their pensions and whether they’re doing so wisely.
What is flexible pension access?
Flexible payments – also known as pension drawdown – allow people to withdraw from their pension pots from age 55, rising to 57 in 2028 25 per cent of each withdrawal is tax-free, while the remaining 75 per cent is taxed as income This is different from the initial tax-free lump sum, up to 25 per cent of the pot, which many people take without triggering further withdrawals – and which isn’t counted in these figuresAnyone thinking of tapping their pension should take time to explore their options, he urged, adding that professional advice and free, impartial guidance from Pension Wise can help people avoid decisions they may regret later.
She said: “It could suggest that many people have been taking pension cash earlier than is ideal, perhaps, for instance, to see them through the cost of living crisis and the spike in mortgage costs, or to help their children or grandchildren onto the property ladder. Which could then also mean that some will be left short later in retirement.
“For instance, how much of these withdrawals is accounted for by people cashing in small pots accrued since auto-enrolment? How much of the withdrawals are planned and made with a sound financial outlook?”
“We would always suggest taking advice before crystallising your pension, not least because there can be tax consequences.”
He said: “We are still in the early days of Pension Freedoms, and we need to be careful not to assume that the behaviours we see now are a good predictor of how people will behave when they have much larger pension pots.
“But over time, with fewer people having traditional final salary pensions and millions more people building up pension pots through automatic enrolment, we will see a shift.
The Government has been contacted for comment.
Hence then, the article about almost half of flexible pension payments made to under 60s risking retirement funds was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( Almost half of flexible pension payments made to under-60s – risking retirement funds )
Also on site :