Retirees could increase their pension pot by more than half by leaving it alone until turning 65 years old, research reveals.
The average withdrawal pensioners take out by the time they’re 65 is £47,000, but if that was left untouched, it would rise by £24,661.
That pension pot surges by an extra £38,000 if invested until you reach 70 – adding up to a total of £85,000 set aside for post-working life.
This is affecting a sizeable number of people once they have finished working, as over a fifth (21%) decided to take out funds between nine and 10 years before they stopped working, Scottish Widows’ data finds.
Further, over three-quarters (78%) of retirees have withdrawn from their retirement fund by the time they retire, with more than half (52%) doing so five years before their selected retirement age.
One programme to help retirees make the best decisions with their pensions is the proposed dashboard from the Department for Work and Pensions (DWP).
However, there is still no launch date for the scheme that will allow people to view all of their pensions in one place. Meanwhile, the cost of it has also shot up by 23% to £235m.
‘More needs to be done to encourage pension saving’
Graeme Bold, workplace pensions director at Scottish Widows, said: “Whilst early withdrawals are often an unavoidable necessity, draining a pension pot too soon can carry risks, which both providers and retirees should be taking steps to guard against where possible.”
“As an industry, it’s crucial that we better understand pension holders’ behaviour, so that we can help them save enough for a comfortable retirement. More needs to be done to encourage people to keep their pensions invested for as long as possible.”
Bold added: “It’s up to pension providers to have the support in place for people through a lifetime of investment – before, during and after they reach retirement age.
“The pensions landscape is ever-changing – people are living longer, which means pensions must cover longer retirements, and more people are choosing to phase into retirement with part-time work. Therefore, it’s essential that pensions are flexible enough to be fit for purpose in today’s world.”
