Britons are increasingly turning to taking money out of their pension savings to make ends meet, research shows, sparking a warning for pension savers.
Experts are warning that this trend means peoples’ long-term retirement could be impacted as they withdraw savings to cover short-term costs.
Some 287,181 households, where the primary earner is aged between 55 and 65, will have taken cash out of their retirement pots by the end of the year, according to recent analysis by Outra.
The number of older working-age people with plans to access their retirement savings has risen by 44 percent compared to 2022.
Older households are withdrawing from their pensions early
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More than £2billion is expected to be withdrawn in 2023 by those households that described themselves as struggling to make ends meet, according to the research.
This is the equivalent of £7,000 per person being taken out of a retirement savings account.
Britons can withdraw up to 25 per cent of their pension without paying tax from the age of 55, which they can do while continuing to work.
This is limited to a maximum of 25 per cent of a person’s available lifetime allowance. For most individuals, the standard lifetime allowance applies which is currently sitting at £1,073,100.
Based on Outra’s data, those accessing their pension pots early are doing so to withdraw smaller amounts.
There have been concerns over the plight of older people amid the cost of living crisis in recent years.
With more older households withdrawing from their pensions early, analysts are calling on Britons to think twice before taking money out their retirement savings.
Peter Jackson, Outra’s chief data and technology officer, said: “People over the age of 55 can withdraw money from their workplace pension pot and the first 25 per cent withdrawn is tax free.
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GETTY“So, this can seem like an attractive option for those struggling to make ends meet. However, the obvious impact of this will be less money left in their pension pot to cover retirement.
“Those approaching retirement should think hard about withdrawing money from their funds unless they are sure they have sufficient funds to see them through retirement.
“I would be deeply concerned if larger numbers were withdrawing money to cover everyday living costs or to pay for emergency one off household costs.”