On the go: Hundreds of thousands of over-55s are unaware they can scale back or stop their withdrawals from their drawdown income, putting them in danger of draining their retirement savings too rapidly.
A staggering 52 per cent of all retirees taking an income in drawdown do not know they can reduce the value of their withdrawals, and 56 per cent are unaware they can stop them.
These findings, from a YouGov study of 2,000 people who have used the pension freedoms for Zurich, show a “critical gap in consumer awareness”, which could leave half of the 615,000 people in drawdown exposed if stock markets plunge.
There were significant differences between consumers who have sought advice and those who have not. Just 35 per cent of non-advised consumers understood they could reduce their drawdown income, compared with 77 per cent of people getting ongoing advice. And 33 per cent of non-advised consumers were aware they could stop their drawdown income, versus 73 per cent of those speaking to an adviser.
Alistair Wilson, Zurich’s head of retail platform strategy, said: “If investment returns come to a sudden halt, savers need to be prepared to step on the income brakes. People who are unaware they can slow down, or stop their income, could seriously damage their savings and deplete their pots too soon.”
Zurich advises savers to protect their portfolio from pound cost ravaging by holding up to two years’ worth of living expenses in cash. This reduces the need to sell investments when prices are falling, giving them a chance to ride out short-term bumps in the stock market.
Alternatively, limiting withdrawals to the ‘natural’ income from share dividends or bonds leaves the underlying investment intact, giving it a better chance to regain lost ground when markets recover.
