27% of homeowners planning to access pension early despite adequacy fears

Nearly a third (31 per cent) of homeowners over 40 plan to work beyond state pension age due to concerns over affordability and financial insecurity, whilst over a quarter (27 per cent) plan to access their pensions early, according to research from Canada Life.

The survey found that many older savers had fears around funding their retirement, with close to a third (31 per cent) of homeowners over 40 who are currently working stating that they cannot afford to retire when they want to, while 30 per cent were unsure if they could.

This was alongside concerns around working patterns, with 39 per cent of respondents worried about their job prospects in the run up to retirement, which the provider noted had been compounded by the fact that 987,500 over 45 year olds are currently on furlough.

Despite these concerns, however, over a quarter (27 per cent) of homeowners over 40 stated that they plan to access their pension savings as soon as they become available, while 25 per cent plan to access their private and state pension savings only once they hit state pension age.

Furthermore, only 10 per cent plan to delay accessing all of their pension savings while they are continuing to work in retirement.

In light of this, Canada Life emphasised the need to ensure that savers understand the impact of accessing their savings and the potential restrictions, such as the Money Purchase Annual Allowance (MPAA), on the amount they may subsequently contribute to their pension.

Indeed, previous research from the provider prompted renewed calls to scrap the MPAA after it revealed that nearly half (43 per cent) of over 55s who are working were unaware of MPAA restrictions, whilst 40 per cent don’t know much about the details.

Commenting on the latest findings, Canada Life technical director, Andrew Tully, said: “We have seen a seismic shift away from traditional retirements, driven by economic and social trends and it simply isn’t the cliff edge event anymore.

“The desire to continue working beyond state pension age is coupled with the fact that many people are nervous about their employment prospects in later life.

“However, for many, this is coupled with a desire to access their pension early. While this may help achieve some financial security in the short-term it means there are substantial doubts about the sustainability of the pension being able to support them through later life

“The MPAA will unwittingly catch out ‘pension dippers’ who want to continue working, given the prevalence of workplace pension schemes.

“The MPAA is an arbitrary allowance which is easy to increase or remove altogether, and would allow savers to rebuild their pensions, especially in light of the pandemic and resulting uncertainty created.”

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