Retirees tap into savings earmarked for retirement
More than a quarter (27 per cent) [1] of UK adults with a private pension have stopped making payments into their fund since 2008 because of tough economic conditions. One in five (21 per cent) of those aged 55 years or older have dipped into their retirement savings since 2008.
A result of the economic downturn
Increasing numbers of adults in the UK are either taking a ‘pension holiday’, drawing on savings earmarked for retirement or downsizing as a result of the economic downturn and the rising costs of living.
According to research from Schroders, we are witnessing a trend whereby people in employment are playing a dangerous game of ‘pensions roulette’ – risking their long-term financial security by drawing on assets set aside for retirement.
Since 2008, more than a quarter (27 per cent) of pension holders have stopped saving into their fund and have not restarted payments, while 6 per cent took a pensions holiday and then recommenced payments.
The least time available to top up pension pots
Interestingly, the largest percentage who stopped paying into a pension were those closest to retirement, those aged 55 plus (32 per cent). This is a worrying trend, as these individuals have the least time available to top up their pension pots from employment income.
One in ten Britons would consider selling their home in order to release some cash and more than one in six (16 per cent) pension holders have dipped into their retirement savings to make ends meet since the recession commenced in 2008. However, this rises to more than one in five (21 per cent) for those aged 55 plus and not yet retired.
Of those disclosing how much they withdrew from their savings, the average amount taken out was £11,157, with 17 per cent taking between £5,000 and £9,999 from reserves.
Gambling with financial security in retirement
Millions of Britons are gambling with their financial security in retirement. Worryingly high numbers have stopped paying into their pension, or have drawn on savings earmarked for retirement to fund everyday living expenses. While this is completely understandable in such tough economic times, by doing this they are risking not having sufficient income to fund retirement. Everyone is being squeezed in terms of disposable income but it is essential that people start planning for their retirement at a younger age.
Generating an income to cover living costs
People need to assess their projected expenditure in retirement and ensure they will have enough income to cover these costs. It is not merely a question of building a big pot of capital; it is about ensuring this is invested so it generates an income to cover living costs once a person has stopped working. ν
[1] On the 16-17 December 2011, Vision Critical conducted an online survey among 2,003 randomly selected British adults who are Springboard UK panellists. The margin of error, which measures sampling variability, is +/- 2.2 per cent. The results have been statistically weighted according to the most current education, age, gender and regional data to ensure samples representative of the entire adult population of the United Kingdom. Discrepancies in or between totals are due to rounding.
