Pension Freedom  

Record number of over 65s accessing pension pots

“This event triggered the money purchase annual allowance; thereby reducing his annual allowance from £40,000 to just £4,000. As someone who is still working it can be penalising, as your employer pension contributions count towards this annual allowance and an annual allowance charge falls on the individual, not your employer.

“Whilst the range of options of accessing your pension have never been better, there are pitfalls to pension freedoms which must be navigated.”

Another driver of the increase in pension withdrawals from over 65s is the growth in bank of Gran and Grandad. 

More grandparents are helping their grandchildren get on the property ladder, by funding the deposit through their pension.  

The number of over 75s making pension withdrawals saw one of the largest increases of any demographic rising 44 per cent to 69,1000 in 2018/19 up from 48,100 in 2017/18.

Salisbury House Wealth also found that volatile stock markets, coupled with government gilts at historically low yields, have encouraged more over 65s to either switch investments into cash in order to de-risk or to take out the funds.

The firm warned that individuals using drawdown need to be aware of the effects that placing money in cash will have on the value of funds over time.

Tim Holmes, managing director at Salisbury House Wealth, said: “Investors who are at retirement age may want to remove risk from their pension but it will depend on how they intend to access their pension assets in retirement as to what action they ultimately should or should not take. Their adviser will be able to discuss this and guide them at this time.

“If pensioners are doing this on the basis of sensible advice and avoid putting that money in inappropriate investments then this new flexibility can be really helpful.

“However, people must be cautious not to de-risk their portfolio too far before or into their retirement as it may negatively impact the growth of their funds.”

amy.austin@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know