Record number of over 65s withdrawing from pensions

The number of people making lump sum withdrawals from their pension schemes aged 65 or over has jumped by 38 per cent to a record high in the last year, Salisbury House Wealth has revealed.

The financial adviser said the rise — from 384,000 at 30 June 2018 to 529,400 30 June 2019 — represents a much faster pace of increase than that recorded for under 65s.

The latter group saw its lump sum withdrawals go up by 23 per cent in the last year from 496,200 to 611,700.

The number of over 75s making pension withdrawals saw one of the largest increases of any demographic, rising by 44 per cent in the last year alone to 69,1000, from 48,100.

Salisbury House Wealth said volatile stock markets, coupled with historically low government gilt yields, have encouraged over 65s to either switch investments into cash in order to de-risk, or to take out their funds and spend them.

It highlighted the trend of grandparents helping grandchildren get on the property ladder as another possible reason for the increase in pension withdrawals.

Recent research from Legal & General showed that the average financial contribution from parents and grandparents to children and grandchildren to fund home purchases has risen by £6,000 this year to £24,100.

Salisbury House Wealth managing director, Tim Holmes, said that if pensioners were withdrawing lump sums on the basis of sensible advice and were avoiding putting money into inappropriate investments, then the trend could be a helpful one.

However, he cautioned people not to de-risk their portfolios too far before or into their retirement, in case it negatively impacts the growth of their funds.

“It is also crucial that savers do not withdraw too much from their pension pot too early — with rising life expectancies, individuals may be forced to live off their pension for a much longer period of time,” he said.

“There are a number of tax issues surrounding removing funds and without the correct advice individuals risk push themselves up into a different tax bracket.”

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