7 in 10 Brits under 65 'risking retirement' with early withdrawal mistake

New figures from the Department for Work and Pensions have sparked concern about how Brits are using their pension funds at a younger age. It revealed seven in 10 people who took flexible payments from their pension since 2015 were under the age of 65.

Lisa Picardo, Chief Business Officer UK at PensionBee, warned that accessing a pension early could easily see people "draining their pension pot before they reach retirement", particularly amid the ongoing cost of living crisis. But it is possible to start withdrawing your pension in your early 60s or even late 50s without putting your retirement at risk if you follow some key principles.

In 2015, the pension freedom rule change allowed people to access their pension from the age of 55. This is currently 11 years before they will be entitled to state pension, and the distance will only grow as the state pension age is continually reviewed and increased in line with life expectancy figures.

For people withdrawing their pensions from the earliest opportunity, this could leave a major funding gap before their state pension payments start. To avoid this, Lisa told Express: "The key is planning ahead and withdrawing sustainably.

"Work out how much you might need each year from your personal pension in addition to what's available from your State Pension, factor in inflation and tax, and consider leaving as much as possible invested to keep growing. Even small adjustments to how much and how often you withdraw can make a big difference to your future income in later life.

"Most importantly, remember your pension needs to last a lifetime. It needs to be there to support you for the whole of your retirement, not just the early years, so pacing yourself can help you enjoy the journey without running out of fuel."

Turning to the new DWP figures, Lisa has a bit more hope for the future as the statistics seem to show "a maturing" in the way over 55s have used their retirement funds since 2015.

The pension expert explained: "Rather than people raiding their pots the moment they turn 55, we're seeing more sensible behaviour, and people are waiting until they're genuinely approaching, or are in retirement, before making significant withdrawals. This may be reflective of longer working lives, delayed retirements and increased longevity.

"Back in 2016, people in their late fifties were the biggest users, taking 42% of all taxable withdrawals, followed by 28% in their early 60s, and 30% in the over 65 age category.

"Now the 55-59 group has dropped to just 26%, with a stable 28% in their early 60s, and 46% of taxable withdrawals from the over 65s."