A million people turn 55 this year triggering pension freedoms
A record number of people will turn 55 this year, giving them unfettered access to their life savings. But with the coronavirus market volatility, savers need to think carefully before making withdrawals.
Estimates suggest more than 940,000 people will turn 55 in 2020, meaning they will be able to access their defined contribution pension pot flexibly.
As such, 2020 is the ‘peak year’ for people reaching the pension freedoms age, according to analysis by Aegon.
However, it added that the numbers reaching 55 will also be higher than usual over the next six years, consistently above 900,000.
Pension freedoms were introduced in 2015, and since then, more than £35bn has been withdrawn by 1.4 million individuals.
As money can be accessed but a portion can still remain in the stock market, the coronavirus volatility poses new challenges for people reaching the pension freedoms milestone.
Steven Cameron, pensions director at Aegon, said: “Coronavirus is affecting all aspects of our lives, including wealth as well as health, employment opportunities and attitudes towards retirement. Some may find themselves without other sources of income and be tempted to start taking a retirement income from 55.
“Others will want or need to continue working to build up sufficient funds to have the retirement they aspire to. The deadly impact of the virus on many thousands may also change people’s attitudes towards choosing between the financial guarantee for life of an annuity and the flexibility of income drawdown under the pension freedoms.”
“The pension freedoms have proven so popular because of the enormous flexibility they offer on how much income to take when. But these come with risks of remaining invested in the stock market which have been brought into stark relief as a result of the coronavirus and resulting market volatility.
“In the current climate more than ever, we strongly encourage individuals, whether considering or currently drawing an income, to seek financial advice before making important financial decisions that could have a lifelong impact.”
See YourMoney.com’s Questions you should ask before accessing your pension for more information.