Seven out of 10 people accessing their retirement savings are under the age of 65 — raising questions about whether they are accessing these funds too early.
This latest data from the Department of Work & Pensions also raises questions about how regulators and schemes are collating data on early pension access since Pension Freedom rules were introduced in 2015.
These figures, which show a high number of early withdrawals, only relate to flexible payments. They do not include those taking their tax-free cash lump sums, which will make the overall numbers accessing retirement funds early even higher. Retirement specialist Just Group said this lack of comprehensive data on withdrawals was a “blind spot” in regulatory policy.
Overall the DWP figures show that almost 43 per cent of all of all flexible payments were made to those aged under 60, with nearly 28 per cent more aged between 60-64.
In total of the £103bn taken as flexible payments since 2015, £36bn (35 per cent) was paid to those aged below 60 and nearly £29bn (28 per cent) to those aged between 60-64.
Just Group said the figures show the huge scale of withdrawal from pensions long before State Pension age, a trend previously described by the Financial Conduct Authority as ‘the new norm’.
Just Group’s communications director, Stephen Lowe says: “Perhaps if the FCA had called it an ‘epidemic’ it might be viewed in a different light and more steps taken to understand the consequences.
“Pension flexibility is double-edged – it can be done for good or bad reasons. Ultimately pensions are primarily to provide retirement income and that money won’t be available in old age if people are using it to subsidise their lifestyle long before retirement.”
He adds: “These numbers give a glimpse of one aspect of pension withdrawal, but do not show the full extent of early access in terms of the number of individuals taking cash and the amounts they are withdrawing.”
Lowe adds: “There is a massive blind spot in our knowledge. We don’t know how much tax-free cash is being taken. We don’t know why people are accessing pensions early or what they are doing with the money. We have some pot-level data but much weaker data at a person-level, considering all their pensions and other assets.
“The result is that we can’t tell how many accessing cash early are doing it for savvy financial planning reasons compared to how many are taking unsustainable amounts that will likely leave them short in the future.”
| DWP total pension withdrawals April 2015-2024 | Total individuals | Total payments | Average payment |
| Up to age 59 | 1,291,000 | £35.59bn | £27,600 |
| Age 60-64 | 827,000 | £28.56bn | £34,500 |
| Age 65+ | 885,000 | £38.13bn | £43,100 |
| All ages | 3,003,000 | £102.29bn | £34,100 |