SHOULD YOU DIP INTO YOUR PENSION POT?

If your income has shrunk or redundancy is on the cards, it can be tempting to use your pension savings (now you can access the whole pot from the age of 55). The number of people dipping into their pension pots as flexible income increased by 56% between April and September 2020, according to the Association of British Insurers (ABI). But it’s important to consider the ramifications, says Jonathan Watts-lay, director of Wealth at Work. ‘There are significant risks if you take money out of your pension without seeking financial guidance first,’ he says. Look at other income sources, such as savings, emergency funds, ISAS and income protection policies. It could also impact whether you would be entitled to income-related state benefits such as universal credit or pension credit.

Rob Yuille, head of long-term savings at ABI, urges people to think about the long-term, such as the cost of care later in retirement, before accessing funds early. ‘Think about your health and life expectancy,’ he says. ‘Evidence shows we are living longer, with a variation in health expectancy. Do you need to provide for your partner financially after you die, or are you relying on them?’