A pension rule change is prompting savers to withdraw their money at the earliest opportunity, a personal finance expert has warned. Appearing on BBC Morning Live, Laura Pomfret explained that individuals are acting now before the regulations take effect.
State Pension Age Increase
The state pension age for both men and women currently stands at 66. It is scheduled to rise to 67 between April 2026 and March 2028. This adjustment by the Department for Work and Pensions (DWP) is driving more older adults to access private pensions and take out lump sums.
Ms. Pomfret told the BBC programme: "There are many reasons why people want to access their pension money early. However, taking money early can have a knock-on effect. If you withdraw a chunk or even a small amount from the pot, there is less money left to grow. This may leave you with insufficient funds when you reach retirement."
Rising Access Age for Private Pensions
She added: "The current state pension age is 66, but this will increase in stages over the next two years to 67. The earliest age at which you can access your private pension is currently 55, but it will rise to 57 from April 28. This causes concern because accessing your pension early could leave you short later."
For those who no longer wish to work and want to access their pension early, they must figure out how to bridge the gap until they reach state pension age.
Low Private Pension Savings
Ms. Pomfret also highlighted that nearly half of working-age adults are not saving into a private pension at all, equating to around 18 million people. "Times are tough right now, and we can understand why people may be choosing not to save, sometimes through no fault of their own," she said. "Only 4% of self-employed workers are saving into a pension, which is just one in 25 people."
These figures come from a recent report, and she emphasised that inflation will affect these numbers. "These figures are for today. If you are retiring in 10, 15, or 20 years, you need to factor inflation in," she explained.
Seek Professional Advice
While the figures serve as a useful guide, Ms. Pomfret recommended consulting a regulated independent financial adviser. "An adviser can help you put together a proper financial plan and consider all the important factors when calculating your retirement needs," she concluded.
