‘Pensioner poverty’ alarm as older people raid pension pots
Older people face the prospect of “pensioner poverty” due to the rising cost of living and the falling value of the stock market, it has been claimed.
Figures from online investment platform Interactive Investor show its customers withdrew a quarter more from their private pensions in January as the cost of energy, food and petrol went up.
The figures have prompted concern that pensioners will not have enough money to see them through retirement.
In January, the average withdrawal from an Interactive Investor pension was £1,944, up 25% on the average for the same month in previous years. In February, the average was £1,910, up 7% on the same month in previous years.
Former pensions minister and campaigner Ros Altmann says these higher withdrawals are a “danger signal for the future”, particularly if they are taking their retirement savings early. “As the cost of basic essentials, such as food and heating have soared, people need higher incomes to cover their bills. Pay increases are far lower than current 30-year record high inflation rates, and people may be searching for other ways to make ends meet,” she says.
“For the over-55s, this could mean being tempted to take more money from their pension funds. This is worrying because private pensions are meant to support people after they finish work, rather than topping up pre-retirement earnings.
“Higher pension withdrawals now risks rising pensioner poverty in future and lower long-term growth.”
Becky O’Connor, head of pensions at Interactive Investor, says the average monthly withdrawal before the pandemic was £1,782. It then dropped to £1,534 as lockdowns were imposed and people were spending less.
The combined pressure of a need for cash to cover higher living expenses, and
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