Following the latest HMRC pension withdrawals data revealing that between April and June this year, £4bn of taxable pension payments were withdrawn from retirement pots by 567,000 individuals, with the average withdrawal 17% higher than the year before, please find a comment from Mark Futcher, Partner and Head of DC at independent professional advisory consultancy Barnett Waddingham.
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Mark Futcher, Partner and Head of DC at independent consultancy Barnett Waddingham, comments: “The impact of the cost of living on people’s retirement planning is worse than we thought. Not only are younger people pausing private and workplace pension contributions, but those over 55 are withdrawing from their hard-earned pots at an alarming rate. When times are tough, it’s natural that people lean toward their savings and, generally, that’s what they’re there for: emergency support. But when it comes to pensions, the risks can be far greater. A pension is supposed to last the length of your retirement; 20, 30, or even 40+ years. It’s a good thing that pension freedoms allow us to access a pension from the age of 55, but to do so has a snowball effect – the tough investment landscape means there’s a pound cost ravaging effect, and those who withdraw will also invoke the Money Purchase Annual Allowance (MPAA) and limit their opportunity to put money back in once the economic reality improves.
“Those considering dipping in should do so as a last resort, and ensure they’re taking as little as possible. HMRC’s data reveals a 17% increase in the size of the average withdrawal – for someone in their 60s with £100k, that increase from £3,000 to £3,500 would create a huge 4 to five year drop in the time their pension will last – and more with inflation’s impact. For those unsure, using a drawdown calculator and speaking to an expert about your options is critical.”
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