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A new report suggests older workers, particularly those in their 50s, could face financial insecurity as a result of a mix of different pressures and early withrawal of pension funds.
The over-50s, especially those aged 50-54, are being hit particularly hard financially as a result of Covid and the cost of living crisis and could face a lifetime of financial insecurity, according to a new study.
Economic inactivity rates have risen by a third amongst the over 50s since 2019, and people aged 50-54 face double the financial vulnerability risk of those aged 70-74, according to new research from the University of Edinburgh’s Smart Data Foundry. It is calling on the UK Government to act now to stop the emerging crisis with several key recommendations.
It adds that many people in their 50s are substantially at risk of financial vulnerability, with many drawing down lump sums from their pension pots, making them even more vulnerable in older age.
The report says older workers in their 50s and 60s are at risk due to a ‘perfect storm’ of circumstances; income drops from loss of employment, ill health or caring commitments for loved ones and a lack of savings and pension provisions.
Many are withdrawing lump sums from their pension pots to deal with these pre-retirement income shocks. But the data found that those who do this are up to 1.75 times more at risk of financial vulnerability. It says most pension pots worth under £30,000 are fully withdrawn in cash which can cause knock-on issues with income tax and entitlement to benefits.
To reduce the risk of pension assets being spent before retirement, the authors call on the Department for Work and Pensions to significantly increase the current capital limit of £16,000 for means-tested benefits. For those on Universal Credit, the report calls for the reform of the Support for Mortgage Relief (SMI) loan facility by removing the zero earnings rule.