Tens of thousands of savers risk a savings shortfall in later life due to neglecting their remaining pot after taking a tax-free cash lump sum, Zurich has warned.
After turning 55, savers can withdraw their pension savings, the first 25 per cent of which would be tax-free, and typically put any remaining cash into invest-and-drawdown or buy an annuity, even if they continue to work.
Zurich and YouGov’s research found that 44 per cent of people who had gone into drawdown to access tax-free cash but had not retired, would leave their remaining balance “untouched and unchanged” until they start taking a pension income.
There could be more than 115,000 consumers who have moved their pension into invest-and-drawdown to take tax-free cash who are unaware of what to do with their remaining pot.
Experts have warned that after moving their savings into drawdown, people need to actively manage their pot, or it could veer off track.
Zurich head of retail platform strategy, Alistair Wilson commented: “After triggering drawdown, consumers need to monitor and adjust their portfolio to ensure market movements don’t leave them exposed to too little, or too much investment risk – yet many are planning to leave their pot dormant until they retire.
“Drawdown gives people much greater freedom and flexibility in retirement, but it doesn’t run on autopilot.
“With no one at the controls, there is a danger tens of thousands of people could see their pensions veer off course.”
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