Seven out of 10 people taking flexible payments from their pensions are younger than 65, according to latest data from HMRC.
The figures show that £83 billion has been taken in flexible payments since pension freedom rules were introduced in 2015. These figures do not include those who have only taken their tax-free cash from their pension fund.
The government data shows that 43 per cent of these flexible payments were taken by those aged 60 or under, and a further 28 per cent have been taken by those aged 60-64. In total this means that at 71 per cent of these payments have been taken by those below the old state pension age of 65.
Industry providers said that the majority of people are using pension funds before their retirement age, although many may have stopped working and are utilising these funds to bridge the period before their state pension kicks in.
Pension experts said this raises questions about whether people are taking “too much too soon”, increasing the risk that they will outlive their retirement funds.
Stephen Lowe, group communications director at retirement specialist Just Group says: “Money taken from pensions early is obviously not going to be available when people are older, raising the questions of the sustainability of these retirement funds.
“These figures show that early access to pensions is very common, usually long before state pension age. Most people need to manage their pension withdrawals very carefully to ensure they don’t run out and these figures do not inspire confidence that is happening.”
The HMRC data shows the balance of those taking flexible payments before they reach age 60. Since 2015, 43% or 1.1 million of the 2.6 million who have taken a flexible payment were aged 59 or under, collectively withdrawing 36% of all flexible payments worth more than £30 billion.
In contrast, those aged 65+ made up only 20 per cent of individuals withdrawing and 21 per cent of the cash withdrawn.
Lowe adds: “Giving people access to pension money at age 55 gives them more flexibility, for example, to deal with periods out of the job market due to redundancy or illness. But having what looks like a large pool of cash at hand can be a temptation for people focused on the short-term. Anyone thinking of accessing cash early needs to think about the long-term consequences.
“Professional advice can help people think about the future while those approaching retirement should take the free, independent and impartial guidance offered by Pension Wise which gives a good overview about financial decisions for later life.”
