Pension savers withdraw more than £5.75bn

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Pension savers withdraw more than £5.75bn

In the first half of this year, the HMRC figures show that more than a million pension savers withdrew a staggering £5.75bn from their retirement pots. That's a rise of 17 percent compared to 2022, and experts are warning that this is unsustainable.

It's an even bigger increase compared to 2020, with withdrawals up 67 percent since then, even though that year's figures were distorted by pandemic lockdowns.

Mr Osborne, a former Chancellor of the UK, said he had been warning this would happen since his pension freedom reforms in 2015, abolishing the obligation to buy annuities at retirement.

So, at the time, thenuities were desperately poor value, so I understand why the reforms were so popular. People naturally prefer to be responsible for their own money. While annuities do one thing, they are another thing. If you live long enough, you can get a guaranteed income based on the length of your life. As more people live to 100, they'll still have to pay for their living expenses, he said.

The majority of investors are leaving their money invested in the stock market through drawdown, where there is no guarantee. When you take too much, too soon, people can run out of pots.

I can see the appeal of drawdown. There is a problem, though. It has never been fully tested.

After 2015's changes, stock markets did quite well and pension savings increased in value as a result of the reforms.

Also, the economy was doing reasonably well, so that the over 55s didn't have to dip into their savings pots as much.

Now the over 55s are being forced to withdraw ever larger sums to finance essential assets at exactly the same time as stock markets are falling.

Global shares are currently on the brink of a brutal crash.

The biggest worry is that many people who make too many withdrawals will simply run out of cash in later life.