Pensioners hit hardest by inflation and market uncertainty, says interactive investor

Keeping up with the cost of living coupled with market uncertainty has driven investors to withdraw more from their pension pots.

Due to an increased need for cash to cover living costs and market uncertainty, the average value of income withdrawals from pensions increased in January and February this year.

This is according to interactive investor, an online trading platform

which collected this data from its Self Invested Personal Pension (SIPP) product.

“Not only do older people face a disproportionate impact on their living standards because of the greater than average proportion they spend on essentials such as energy and food, they are also more exposed to the slings and arrows of global stock market fortunes,” said Becky O’Connor, Head of Pensions and Savings at interactive investor.

Its research indicated that the average value of withdrawals from a SIPP drawdown in January was 8% higher than the average recorded over the past four years.

January recorded an average withdrawal amount of £1,944, which was up 25% when compared to the average withdrawal amount in the same month across the past four years.

“What we are likely to see over the coming months is retired people paying more attention than ever to that fine balance between withdrawing what they need to cover living costs and keeping enough in the pot to sustain them for their whole retirement,” said O’Connor.

Pension pots are also falling in value. The average value of a SIPP on interactive investor fell by 8.9% between the end of 2021 and the end of February.

Further research from the company determined that if pension withdrawals continue at a monthly average of £1,927, then fall in value by 10% over one year before growing by 3% in the second year, the average pension pot could lose value by the time the investor reached the age of 65.

With these factors taken into consideration, a £300,000 pension at the age of 65 would fall to a value of £270,000 and would run out at around age 73 instead of age 75.   

A pension pot is a vital source of income for many retirees across the United Kingdom. Therefore, it is important to manage this savings pot for your future use.

This is why Moneyfacts has published several guides on how to plan for your retirement. From understanding when to start saving towards your pension to explaining how to get pension advice, we aim to help answer all your questions.

Alternatively, we also recommend you make use of a financial adviser to find out what pension funds will best suit your needs and goals.