The FCA announced that more over 55s are accessing their pensions, and over half are cashing out their pension pots completely. In 2022/23, the number of pension plans accessed for the first time was up almost 5% compared to the previous year, to almost 740,000 (739,535), and 56% were cashed out in full, most of them worth £10,000 or less.
Jonathan Watts-Lay, Director, WEALTH at work – a leading financial wellbeing and retirement specialist comments;
“It’s concerning that so many pensions are being cashed out in full. Many people have spent most of their working life saving into their pension, and it might need to last more than 30 years. Deciding what to do with your pension is possibly one of the biggest financial decisions of your life.
If people are using their pension savings earlier than planned due to current financial pressures, it really must be their last resort. Any money taken from your pension savings could have a dramatic impact on your quality of living in later life. It would be devastating for all those years of saving to be undone due to a knee-jerk reaction to the current financial pressures.
It is important to make informed decisions based on what is right for you. Many people don’t understand that they pay tax on their pension income, and by withdrawing all at the same time can find themselves as first time higher-rate tax payers. There is a lot at stake and unfortunately expensive mistakes can be made.
Many workplaces are now offering financial education and guidance to help employees understand how they can make the most of their finances now and for the future. It is important that people speak to their employer to find out what help is available.”
Source: https://www.fca.org.uk/data/retirement-income-market-data-2022-23