Martin Lewis warns people born in these years 'this is a must listen' or they could lose thousands

Martin Lewis has sounded the alarm for workers born in specific years, cautioning that they could be at risk of losing £10,000 or more from their pensions. The financial guru highlighted the issue on his latest episode of the Not The Martin Lewis podcast, where he was joined by pensions expert Charlotte Jackson.

He specifically called out to those born in 1969, 1970, 1971, 1972, or 1973 - essentially those approaching 55 - to heed his advice if they're considering dipping into their pension savings. Lewis warned of significant tax repercussions and the potential underestimation of how long individuals will need their pension funds to last.

On his podcast, Martin Lewis advised: "If you know anyone thinking of taking money out of their pension (or nearing age 55). This is a must listen as get it wrong and it can cost you £10,000s. Do spread word.", reports the Express.

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He further cautioned his audience about longevity, saying: "Don't underestimate your longevity. Someone aged 65, on average a man will live another 20 years, a woman another 22 years." Adding to the complexity, he noted: "But you have a 10% chance as a man of living to 96, and a 10% chance as a woman of living to 98 and it's worth factoring that in." For money-saving tips, sign up to our Money newsletter here

Factors such as health, smoking habits, and current age all play a role, according to Lewis. Wrapping up, Martin underscored the importance of understanding the tax implications when withdrawing from a pension, as mistakes could lead to losses amounting to tens of thousands of pounds.

He elaborated: "You generally get 25% of the money in your pension tax free, and the rest is taxed. But what counts and when it's taxed is when it gets complicated." Martin then suggested his listeners visualise their private pension pot (i.e. a pension accumulated from work earnings - not the state pension) as a giant Swiss roll.

He further explained: "Most of the roll is sponge and you have your luxury jam bit in the middle. Well the sponge is the taxable part of your pension and the jam running through the middle, that's your tax free amount. Now if you take your money out of your pension using it like a bank account, you get a slice of the swiss roll. And that swiss roll contains whatever amount you've taken from your pension, 25% of it is tax free, and 75% of it is taxed at your marginal rate, whatever income tax rate you're paying."

Martin continued: "But if you do what's called a draw-down or annuity then you can just take the jam, you can take 25% of your pension totally tax free and you're paid the rest via the draw down or annuity later when you take it."

He said that, in this way, you could opt to take the remainder of your pension later on, when you've ceased working or earning, and that would mean you pay less tax because you're no longer in a higher tax bracket, or you have the full £12,570 personal allowance available to you.