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Pension changes could leave many without cash


The charity Age UK has warned that the pension changes coming in April could leave significant numbers of older people running out of money in retirement.

The new rules mean anyone over the age of 55 can take as much money as they like out of their Defined Contribution schemes, at lower tax rates. Age UK believes with the new rules pensioners may run out of money by age 75 years.

They use an example of someone on a £29,000 pension pot who would withdraw £3,000 a year from the age of 65. They would run out of money at age 75. Their money will last longer if they draw only £2,000 each year, but only until age 81. The average life expectancy at age 65 is currently just over 83 for men and just under 86 for women.

Even smaller withdrawals mean many pensioners risk having to survive for several years without any income from their Defined Contribution pensions.
Age UK also claim that the pension changes do not include enough safeguards to help people understand the impact of their decisions or help them make the most of their savings. In response to their warning they have launched a eight point plan, which sets out actions that the Government needs to implement to give the public increased financial safeguards and confidence in the pensions industry.

The Government has said that everyone will be entitled to free and impartial advice on their pensions.

Caroline Abrahams, Charity Director of Age UK, said:
‘We welcome people having more flexibility in how to use their pension savings. But that makes it even more important that we fully understand the implications and consequences of our financial decisions and can trust the financial services in which we have invested.

‘That’s why we believe that there must be additional checks and balances introduced to the pensions legislation in addition to the impartial guidance that will be available.

‘This is too important to leave to chance. We believe, if implemented, our eight-point plan would give people the added security and reassurance they need to know that they are making the most of their hard earned savings.’

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