Half take pension lump sum at 55 just ‘because they can’, research reveals

Research from Legal & General (L&G) has revealed that one in five (21%) people who withdrew a cash lump sum from their pension pot did so as soon as they turned 55, with 46% saying they did so ‘because they could’.

The research, which surveyed individuals over 50 to understand their retirement decisions and plans, showed that a lower number (32%) of people who accessed their pension did so to cover essential expenses.

More than a quarter (27%) of UK adults aged 50 or over were found to have made decisions about their pensions without seeking advice or guidance leaving themselves exposed to unexpected tax bills or losing entitlement to means-tested benefits.

It also reveals that 24% of people who have withdrawn a cash lump sum did not realise that taking a lump sum could affect their eligibility for means-tested benefits, with 11% saying it had a direct impact on their entitlement.

Among those who did withdraw a lump sum, two-thirds (67%) took 25% or less to stay within the tax-free allowance, while 10% withdrew their entire pot.

If given the choice again, 18% would have withdrawn less or no money as a lump sum.

In response to these concerns, L&G is partnering with Turn2us, a national charity offering practical information and support to people facing financial insecurity.

Through this partnership, L&G is signposting customers to the Turn2us Benefits Calculator, a tool designed to help customers check whether they are entitled to benefits and understand how changes to their circumstances may impact their benefit entitlement.