Pension withdrawal warning: Pensioners rush to take out funds 'serious danger for future'

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As the cost of life’s essentials such as food and heating are going through the roof, people need higher incomes just to cover their basic bills. But, with pay rises lagging well behind current 30-year record high inflation rates, many employees will be struggling with soaring price rises, searching for other ways to make ends meet. It is hardly surprising then, to see people taking more money from their pension funds. 

The sooner the Government gets to grips with inflation, the better for us all.

This is worrying enough, because private pensions are meant to support people after they finish work, rather than topping up pre-retirement earnings.

Coupled with latest labour market news showing more than half a million over 50s have left the workforce since the pandemic began, the signs are deeply concerning.

Higher pension withdrawals now, risks rising pensioner poverty and lower long-term growth.

Of course, having private pensions to fall back on, before reaching the ever-rising state pension age, is helpful short-term.

But spending more of their pension savings now, to keep up with accelerating inflation, increases the likelihood of exhausting their retirement fund and having less to spend in the years ahead. 

Using a pension to replace earnings in your 50s or early 60s may be a useful ‘stop gap’ before returning to (perhaps part-time) employment.

However many people have suffered during the pandemic and remain affected by the massive NHS backlog or have taken ‘early retirement’ to care for loved ones, leaving them little alternative.  

With ongoing ageism in the workplace and despite record labour shortages, they may never get back to work again, making them permanently poorer.

The Government needs to urgently investigate what is happening to private pension savings, encourage more over-50s back to work if they want to, and encourage people to build funds back up again.

Part of the problem is that saving rates have been so low for so long that many people have, understandably, stopped saving in recent years.  

So, the only money that can tide them over when facing huge unexpected increases in living costs – as we are seeing right now – may be in their pension.

But this will leave them, their loved ones and the rest of society worse off in future.  

The sooner the Government gets to grips with inflation, the better for us all.

• Baroness Ros Altmann is the campaigner and former pensions minister



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