Research by Portus finds increasingly numbers are using their pension pots to clear debts - risking poverty in retirement
Worrying research from employee benefits consultancy Portus reveals hard-up employees are being forced raid their pension pots while they’re still at work to pay off debts.
Portus finds more than one in five (21%) of staff say they’ll release more than their cash-free sum while still at work– and it's a figure that rises to 27% amongst those who are aged 55-64.
The most common reason for drawing down money is paying off debts owed (37% of all respondents), followed by blowing it on a holiday of a lifetime (35%).
But the trend is worrying because releasing money in this way is a pyrrhic victory, with most employees accepting that if they raid their pension early, it’ll leave them in penury in later life.
Portus finds some 58% of employees predict they won’t have enough money to live on in retirement, while 49% say they expect to have to work beyond their expected retirement age because of their poor finances.
Portus Consulting’s commercial director Steve Watson said: “Now it has become possible to withdraw more cash from a pension early, there is a real risk people are giving into temptation and taking out money which they should save for retirement.”
Since the introduction of pensions freedoms, employees have been releasing funds on a huge scale – £25 million every day. “As more people realise they can do this, the figure will only rise, and more people will be unable to afford to retire,” added Watson.
He added: “This is not just a problem for employees, it is increasingly an issue for employers too. Staff who feel their forced to remain in the workplace may not be the best for engagement and productivity. Performance issues are inevitable and younger talented employees will become frustrated as career progression is slowed down.”