OAPs risk poverty as they take £30bn from pension pots
OLDER Britons are warned against a “cash today, poverty tomorrow” mentality as figures show the sums taken out of pension pots could leave some running out of money.
Since April 2015, over-55s with defined contribution (DC) pensions can withdraw all their savings.
More than £30billion has been accessed, says the Association of British Insurers (ABI).
In 2018/2019, 350,000 pension pots were fully withdrawn, increasingly among people aged 55 to 64.
Warnings
Figures from the Financial Conduct Authority (FCA) showed that in 2018/19 nearly half did so without regulated guidance.
Four in 10 withdrawals were at an “unsustainable” annual rate of eight per cent and over.
Insurers recommend schemes give mandatory risk warnings and later-life financial reviews, and ban unregulated investments.
Withdrawing 3.5 per cent from a pot annually should ensure a 95 per cent chance of not exhausting savings, but seven per cent only delivers a 60 per cent chance.
Before 2015, DC pension savers had to buy an annuity with their pension pot. Guidance service Pension Wise was set up alongside the retirement freedoms.
But the ABI recommends action on pension planning from the Department of Work and Pensions and the Money and Pensions Service, and the establishment of a Retirement Commission to advise on policy changes.
ABI’s Yvonne Braun said: “This report highlights warning signs.We urge Government and regulators, with the industry, to act on it.
“The pension freedoms may have brought about a retirement revolution but it is too soon to tell how things will turn out.”