Withdrawing pension cash before reaching state pension age is fast becoming the “new norm” — but financial experts warn it could leave many short of income in their later years.
New figures from the Department for Work and Pensions (DWP) reveal that seven in ten pension savers who tapped their pots in the past decade were under 65. Strikingly, 43% of all flexible pension withdrawals went to people under 60, while another 28% went to those aged 60–64. Since pension freedoms were introduced in 2015, more than £103 billion has been taken out, with £36 billion paid to under-60s and £29 billion to those aged 60–64.
On average, those under 60 withdrew £27,600, rising to £34,500 for ages 60–64. For over-65s, the average payout was £43,100. These figures exclude tax-free lump sums, which could add billions more.
Stephen Lowe of Just Group cautions that while pension flexibility can be beneficial, it’s a double-edged sword: “Money used to boost your lifestyle early on won’t be there in old age.”
The UK state pension age is currently 66 and will rise to 67 by 2028, with further increases planned. From April 2028, the minimum age to access pensions will move from 55 to 57, reflecting concerns over early access. Additionally, upcoming inheritance tax changes from April 2027 — which will include defined contribution pensions in IHT calculations — are prompting some to spend their pots rather than pass them on.
Experts stress the importance of seeking guidance before withdrawing funds. Free, impartial help is available from Pension Wise, while financial advisers can tailor strategies for sustainable retirement income. Without careful planning, today’s early withdrawals could turn into tomorrow’s financial shortfall.
