An increasing number of savers have been forced to dip into their pension savings amidst the cost of living crisis, latest figures from HM Revenue & Customs have shown.
The data showed a 23 per cent increase in the number of people accessing their pension for the second quarter of this year compared to the same period last year, with £3.6bn removed by 508,000 individuals.
The average withdrawal for this period was £7,000, and while experts have said we cannot be certain what has driven this behaviour, AJ Bell head of retirement policy, Tom Selby said the most likely culprit causing the "raiding" of pensions is inflation.
“[The] numbers provide clear evidence that squeezed savers are being forced to turn to their pension pots to make ends meet,” Selby said.
“With millions of families struggling to pay the bills at the moment, for many turning to their hard-earned pensions will feel like the only option."
“There will also inevitably be lots of parents or grandparents who are taking some income from their pensions to help younger generations get by,” he added.
The same period last year (April-June) saw £2.9bn withdrawn, while the first quarter of this year, before the cost of living crisis really began to bite, saw £2.3bn of taxable payments taken out.
In total across the 2021/22 tax year, £10.6bn of flexible withdrawals were made by savers, up from £9.6bn in 2019/20.
Although the number of flexible withdrawals from pensions has risen over the past few years, the change this quarter represents a significant spike.
Former pensions minister, now partner at LCP, Steve Webb said: “These dramatic figures are the clearest sign yet that people are turning to their pensions to help them with the cost of living crisis. In Spring of this year pensions and benefits only rose by around 3 per cent when inflation was already around 9 per cent.
"For those who have run down cash savings, it seems that the pension is their next port of call. It would be worrying if the only way people could cope with the cost of living crisis was by ravaging their living standards in retirement”.
Quilter’s head of retirement policy, Jon Greer pointed out that during the pandemic there was not such big increases as the government support schemes "did their job and prevented a mass exodus of savings".
“However, we are now facing a very different beast as energy bills and food costs are set to soar along with mortgage payments and pensioners may well feel that they need more each month to get by," Greer said.
Selby warned that anyone accessing their pension or increasing withdrawals as a result of inflation “need to consider the long-term impact of this decision”.
“Accessing your pension early, or upping your withdrawals, will put the sustainability of your retirement plan under strain. This may be a secondary consideration for people truly struggling as bills rise, but it’s crucial not to stick your head in the sand or make big decisions like this blindly,” he said.