One in five to cash in pension before retiring

This rises to as much as 27% among employees aged between 55 and 64.

The main two reasons for taking out cash are revealed as being to pay off debt or to have a holiday of a lifetime. Around 37% say they will use some or all of the cash to clear debts, and 35% to pay for a luxury break.  

Yet Portus warns that as more people release cash from their pensions early, it is likely to lead to more suffering financially in retirement - 58% of people currently in work don’t expect to have enough income in retirement and 49% claim they will have to work beyond 65 because they will not have enough money to live on.

Since the reforms came into force, over-55s have been releasing around £25 million a day from their pension funds. However Portus research reveals that 22% of people in work aged 45 - 54, and 7% of those aged 55 - 64, are still not aware that they can do this.

Steve Watson, Portus Consulting Commercial Director, said:

“Retirement has changed and more people are working longer. The shift from defined benefit to defined contribution pension schemes has generally resulted in people having less income in retirement.

“Now that it has become possible to withdraw more cash from your pension early, there is a real risk that people will give into temptation and take out money which they should save for retirement.

“The risk for employers is that staff will be forced to carry on working because they can’t afford to retire. Since the introduction of pensions freedoms people have been releasing around £25 million a day, but as more people become aware that they can do this, this figure will increase and more people will be unable to afford to retire."