Asked to imagine themselves at age 55 with £100,000 in pension savings, the majority (51%) of those aged 65 and over said they would keep the funds invested until State Pension Age. That compares to three in 10 (30%) in the 40-55 age group who would opt to keep the pension invested.
With savings in Defined Contribution pensions now accessible at age 55, the research reveals an interesting contrast in attitudes between those approaching this key decision point and those who have already retired.
“Those already in retirement were much more likely to choose to be patient when it comes to accessing pension cash,” said Stephen Lowe, group communications director at Just Group.
Among those aged 40-55, seven in 10 (69%) said they would start to use the fund at age 55 to provide either cash lump sums or income. Overall fewer than half of (49%) of those older than 65 said they would access cash at age 55, with this proportion falling with greater age.
“The research suggests that those with experience of retirement and living on a pension see the benefit of keeping funds invested for longer,” added Stephen Lowe. “It suggests that many people now thinking of taking pension money at 55 may look back in the future and regret that decision, wishing instead that they had left it invested until closer to retirement.”
Pension 'freedom and choice' rules have allowed easy access to pension money for many but he reminded people that once that money is spent or taken out it won’t be available to provide retirement income later in life.
“As the saying goes ‘just because you can, doesn’t mean you should’ – and the same applies to accessing pensions at age 55. It’s an option not an instruction. More than half of 55-65 year olds took pension cash by age 55 according to the FCA, and only 43% of these even considered leaving their money invested for longer to grow, even though most said their pensions weren’t enough to live on2.
“It may be that people are taking pension money early with a plan to top it up later. But those plans will be difficult to follow through if people lose their jobs, fall ill or find their contributions limited to £4,000 a year once they trigger the Money Purchase Annual Allowance rules.
“Our research suggests that when it comes to accessing pension savings, the over 65s who have the benefit of hindsight, say don’t rush in, take time to think it through.”
His advice to anyone thinking of accessing their pension money is to speak with an independent financial adviser or take the free, independent and impartial guidance on offer from the Government through Pension Wise, before making any decisions.
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