Pension withdrawals to increase to £6bn
The amount of extra cash withdrawn from pension pots come April 2016 could reach £6 billion, three times the government’s official estimate of £2 billion, according to research.
In March 2014, chancellor George Osborne unveiled a dramatic pension reform including allowing people from April 2015 to access their pension savings as they wish at the point of retirement, subject to their marginal rate of income tax.
Actuarial firm Hymans Robertson forecast that up to £6 billion will be taken out of pension funds on top of what can be withdrawn now.
This suggests that almost half of those aged over 55 intend to take all or some of their money out, the equivalent of 2 million people nationwide.
Chris Noon, partner at Hymans Roberston, said the government and pension providers needed go beyond the guidance guarantee to alert retirees to the danger of drawing funds without help from an adviser.
He said things as basic as including warnings about the sustainability of income withdrawals through a ‘traffic lights’ system could help consumers.
For example, if the likelihood that income withdrawn in the last year can be sustained until the end of the retiree’s life is greater than 90%, that could be rated green. Lower likelihoods could be shown as amber or red, raising the retirees’ awareness about their trajectory and the need to take action.
He added: ‘Through the publication of calorie information, the food industry is helping people understand the longer-term implications of over-eating. If the pensions industry doesn’t do the equivalent, we will find that many who have saved conscientiously for decades with us will then overspend out of ignorance. It would be irresponsible of us if we allowed this to happen.’