Over-55s ‘must avoid notion of cash today, poverty tomorrow’

sion.barry@walesonline.co.uk

THE rate at which over-55s are withdrawing cash from their pension pots could leave some at risk of running out of money in retirement, insurers have warned.

The Association of British Insurers (ABI) said that, nearly five years on from the launch of the pension freedoms, the notion of “cash today, poverty tomorrow” must be avoided, as large withdrawals from pension pots could mean later life hardship.

It said there are concerns that if the current rate at which many people are typically withdrawing cash from their pension pots continues, future pensioners will be at risk of running out of money in retirement.

The ABI also said a “black hole” in guidance and advice when people are weighing up what to do with their pension pots needs to be plugged.

It recommends that schemes give mandatory risk warnings if people ask for transfers out of final salary schemes, later life financial reviews, and banning unregulated investments.

Since April 6 2015, over-55s with defined contribution (DC) pensions have had the flexibility to access as much of their savings as they want under the new pensions flexibility rules.

But the changes have also placed much greater responsibility on savers to ensure that they make the retirement choices that are right for them.

So far, more than £30bn has been accessed from pension pots.

In 2018/2019 alone, some 350,000 pension pots were fully withdrawn. Full withdrawals have increased among people aged 55 to 64, the ABI said.