The amount of money over-50s have withdrawn from their pension pots far exceeds what pension holders anticipated doing just one year ago
When it comes to withdrawing money from their pensions, there is a very large gap between the expectations of policy holders and the actual experiences of those who have withdrawn money.
The Impact of Pension Changes report shows that the average amount withdrawn is double that which policy holders anticipated a year ago. In August last year over-50s with direct contribution pensions believed they would withdraw around £15,000 from their pots. However, when those who had taken out money were asked in July this year how much they had withdrawn the average was £35,000.
Such a discrepancy between expectations and experience could be storing up a lot of trouble for the future given the amounts taken out and how life expectancy continues to rise. This is especially true given the report also shows that over half (53%) of those facing retirement say they have a poor understanding of what their financial situation will be in retirement.
The Impact of Pension Changes report reveals the extent to which ‘pensions freedom’ legislation has affected policy holders’ post-retirement strategies.
However, while the changes to pensions over the last few years raise the prospect of a financial crash among retirees in the coming years, arguably more of an immediate concern is how much worse off those without pensions are. The data also suggests that over-50s with direct contribution pensions are much more likely to be financially aware and better off than those without a pension.
The research shows that those with direct contribution pensions have higher monthly disposable incomes than those without a pension (£577 versus £262) and are almost twice as likely to purchase a financial product in the next six months. Furthermore, over half (52%) of pension holders take news about finance and the economy into account before making big purchases compared to less than four in ten (39%) of those without pensions.
Unless steps can be taken by the government, the industry, employers and individuals, a large number of over-50s could soon be stepping into a pensions void that only leads to penury.
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