Spike in savers looking to access pension before age 55

Spike in savers looking to access pension before age 55

Anxious savers are trying to cash in their pensions more than 20 years before they are allowed to do so, as they fall victim to online scammers exploiting financial distress amid the coronavirus pandemic.

The number of people looking to withdraw their pensions before the minimum age of 55 has soared more than sixfold in just three months, according to online pension provider PensionBee, from five in December to 31 last month.

It said the median age of people seeking early access to their retirement savings in March was 35, with one customer as young as 32 asking if she could turn to her pension pot after being made redundant while several months pregnant.

Savers and retirees have long been targeted by fraudsters, as rogue advisers looked to exploit pension freedoms, introduced in 2015, that allowed members to trade in their savings for a cash lump sum.

Read: How the pension scammers are getting away with it

But scams have proliferated this year, with a 400 per cent increase in Covid-19 related fraud already reported by the City of London Police within the space of a month. 

Vulnerable people are now even being targeted with paid adverts on Google, with a quick search of “early pension release under 55” returning a number of sites offering to help them cash in their pension at any age.

Google was approached but did not immediately respond to a request for comment.

James Walsh, a partner at law firm Fieldfisher, said: “Pension schemes are popular in normal times.

“Everyone is worried about how their pension is performing so it’s probably rife at the moment with people trying to get access to pension funds.”

With “a huge increase in phishing” attacks, pension schemes could be doing a lot more to educate their members, he added. 

HM Revenue & Customs can tax up to 55 per cent on unauthorised withdrawals before the age of 55, while cashing in a pension early is usually only permitted if you are expected to live less than a year because of serious illness.

Clare Reilly, head of corporate development at PensionBee, said: “Covid-19 has put us all in unchartered territory.

“While it might seem an attractive decision when times are tough, we urge consumers to exercise extreme caution when considering online financial advice around early pension release.”

Research from the All-Party Parliamentary Group on Pension Scams showed that with more people staying at home, in line with social distancing and lockdown restrictions, it’s much more likely that pension savers will be contacted by scammers via phone or online.

In response, The Pensions Regulator, Financial Conduct Authority and Money and Pensions Service issued a joint statement urging people not to make rash decisions with their pensions in the wake of the pandemic.

Oliver Telling is a reporter for FTAdviser's sister title Pensions Expert

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