Savers accessing their pensions early make it harder to plan for their later life, Canada Life has warned, as it found the average age at which people planned to draw from their pensions was 62.
Research from the provider, published yesterday (December 11), found on average people planned to access their private pension at age 62, retire two years later at age 64 and receive their state pension from age 67.
The provider warned that younger savers, those under the age of 55, were particularly at risk of being too ambitious in terms of achieving their ideal retirement goal.
This was because they planned to retire at age 63, having accessed their private pensions at 62, meaning their pension pot will have to last them a long time in retirement.
Andrew Tully, technical director at Canada Life said: “Working till you drop clearly doesn’t appeal to the average UK worker who has plans to slow down in their early 60s, typically retiring from work three years before their expected state pension age.
"This ambition is helped by an expectation that they will begin to access their private pensions before they retire, at age 62.
"This creates a clear financial planning issue and people need to take positive steps early to mind the pension’s gap. Whether that be saving more, moderating their ambitions or considering working longer."
Alan Chan, director and chartered financial planner at IFS Wealth & Pensions, said: “This approach does create financial planning issues because generally people are just not saving enough for retirement and to access their pensions early will often compound this fundamental problem.
“In my experience, the ones who do access their pensions early usually just withdraw their tax-free cash and will continue to work and save until they eventually retire so this tends not to be as bad.”
| Average | 18-34 | 35-54 | 55+ |
Age people plan to access their pension | 62 | 62 | 62 | 63 |
Age people plan to retire from work | 64 | 63 | 63 | 67 |
Expected state pension age | 67 | 67 | 67 | 66 |
Mr Tully said product choice could also play a role in solving the problem as "a solution that ensures flexibility, for example a lower income while working, increasing as you move towards state pension and then dropping again can prove beneficial from a tax planning perspective".
amy.austin@ft.com
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