People are being warned to make sure they have all the necessary information or risk losing thousands of pounds in retirement. Research has indicated that one in three people withdraw money from their pension pot before they retire.
However, most of these people do so without any financial advice, putting them at risk of running out of money when they eventually retire. Many say they were forced to do so because of rising costs, while others used it as a stopgap measure before their state pension kicked in, WalesOnline reports.
The study, by retirement specialists Just Group, found that 28% of over-55s had withdrawn money from their pot before retirement. One in three of these individuals said they did so to plug the gap before reaching state pension age, which is currently 66 but is set to rise to 67.
READ MORE: TikToker Stayed at North Wales’ ‘Worst-Rated Hotel’ and Says I Was ‘Totally Shocked’
READ MORE: Enforcement action against luxury North Wales holiday park withdrawn
Under current rules, anyone over 55 can access their pension savings. But the longer you leave it intact, the more you will have when you retire.
Just Group says that if you withdraw £1,000 a year from your pension between the ages of 55 and 66 you will have lost £11,000 from your pot – the impact is bigger than that. If we assume you will have interest and returns on your pension investments of around 5%, that means you will have actually lost almost £15,000.
Increasing this amount to £2,000 a year will mean you will have £29,834 less in your fund, after interest, than if you had left it. Stephen Lowe, group communications director at Just Group, said: “Our research shows that around a third of over-55s received pension money before they stopped working, some because they wanted to and some because they needed it.”
“It appears that accessing pensions before retiring from full-time work is helping a significant number of people to cope with the rising costs of daily living and sudden or unexpected events, such as redundancy or ill health. Around 45% of those who withdraw pension money before leaving work say they do so simply to have tax-free money, but a significant minority, around a third, do so to supplement their income.
“Whether taking pension money before retirement is a good or bad decision depends on people’s individual circumstances, but it is important to remember that pension money taken and spent before retirement will not be available to provide further income. forward in life.”
He encouraged anyone considering using their pension money before retirement to get through a difficult situation, such as redundancy or illness, to take a moment to think about whether it really is the best (or only) option. A good place to start is to check whether there are state benefits that provide additional income.
“If people decide to make lump sum withdrawals from their pensions, they should think about how to do this in the most tax-efficient way. In difficult times, the pension fund may seem like an easy solution to an immediate problem, but it is important that it is not the default solution.
“People may have other options and it is important that they are fully aware of all the options available to them and understand how decisions made now are likely to affect their lives in 10, 20 or 30 years’ time. We urge anyone considering their pension options to take advantage of the government’s free, independent and impartial advice service, Pension Wise, which can provide a useful overview of the options available before and during retirement.”
According to Pensionworks, to enjoy a comfortable retirement, people will need around two-thirds of their pre-retirement income to achieve financial independence.
North Wales Live’s WhatsApp community for top stories and breaking news is now live – here’s how to sign up
See what’s happening in your area:
