Seven in ten of the three million pension savers who have taken flexible payments since the introduction of 2015’s ‘pension freedom’ reforms were under the age of 65, sparking concerns that people may be depleting their pension funds too soon.
The latest figures from the Department for Work and Pensions, which exclude billions of pounds in tax-free cash withdrawals, show that almost 43 percent of all flexible payments were made to people aged under 60, with a further 28 percent to those aged 60-64.
The current state pension age is 66 for both men and women. However, it is due to increase to 68 between 2044 and 2046, or sooner.
Of the £103 billion withdrawn since 2015, £36bn (35 percent) went to people under the age of 60 and £29bn (28 percent) to the 60-64 age group.
Retirement specialist Just Group said the figures reveal the “huge scale” of pension withdrawals long before state pension age, a trend the Financial Conduct Authority has previously described as “the new normal”.
The trend raises questions about employees’ long-term financial security and potential future reliance on workplace support or extended working lives. Early withdrawals may leave some employees with insufficient funds in later life, increasing the likelihood of delayed retirement and associated workforce management challenges.
“Perhaps if the FCA had called it an ‘epidemic’ it might be viewed in a different light and more steps taken to understand the consequences,” said Stephen Lowe, group communications director at Just Group.
“Pension flexibility is double-edged, it can be done for good or bad reasons. Ultimately pensions are primarily to provide retirement income and that money won’t be available in old age if people are using it to subsidise their lifestyle long before retirement.”
With pension freedoms now well embedded, HR professionals have a role to play in ensuring employees understand the long-term implications of accessing funds early. Financial education, targeted communications, and access to guidance can help employees make informed decisions, protecting both their future retirement income and the organisation’s workforce planning goals.
Just Group’s findings highlight the importance of proactive engagement on pensions, particularly for employees in their 50s and early 60s, to prevent future financial shortfalls and the business risks they may create.
