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Brits dip into pension pots to ease financial struggles

Paloma Kubiak
Written By:
Paloma Kubiak

Almost half (46%) of financial advisers say their clients are withdrawing funds from their pension to cope with the ongoing cost-of-living crisis.

The impact of rising bills and food prices has meant over a third (35%) of advisers report their clients have altered their pension plan by accessing their cash.

Financial advisers have also noticed a change in the type of investments being made, with pension savers opting for a more cautious approach, according to the survey from Standard Life.

Three in ten (29%) advisers said their clients now prefer to invest in lower risk options to safeguard against potential market downturns.

Meanwhile, 36% said their clients were taking money to set up ‘rainy day funds’ to give them a savings buffer for unforeseen emergencies and financial shocks.

The survey comes after an earlier Standard Life report found that over a third of over 55s will spend their tax-free pension allowance within six months of withdrawing the funds.

The first 25% of the pension can be taken out tax-free, but the remaining 75% is taxable.

‘Many reassess plans’

Chris Hudson, retail advised managing director at Standard Life, said: “The economic backdrop is having a stark impact on people’s finances, causing many to reassess their plans.

“There’s a lot to contend with – from sky high mortgages, rising interest on debts and ever changes tax rules – and it’s important to factor all of this into financial planning.”

He added: “In this increasingly complex environment, financial advisers have a crucial role to play in navigating their clients through it all and helping them withstand the turbulence as best possible.

“This will give peace of mind to clients, as well as hopefully help them weather the financial storm.”