Pension savers have £29,800 wiped from pot after mistake when accessing it

Savers have been warned over a pension mistake that could leave them £30k worse off in retirement. Pension savers could end up worse off long-term by dipping into their pots too soon, pensions experts have warned households.

Research by pension firm Just Group found 28% of those over 55 said they had taken money from their pension before they retired, with a third of those saying they needed extra income to bridge the gap before state pension age.

If you withdrew just £1,000 a year from your pension between ages 55 and 66, you would have already lost £11,000 from your pot, due to interest. Stephen Lowe, group communications director at Just Group, said: “Our research shows about one-third of over-55s took pension money before giving up work - some because they wanted to and some because they needed to."

READ MORE Met Office issue verdict on when heatwaves will hit UK in June and July

Because of the effects of compound interest, you would actually have lost nearly £15,000. If you increased your withdrawals to £2,000 a year, you would have actually lost £29,834 in total, Mr Lowe went on to warn the Sun newspaper.

He said: “It seems that accessing pensions before retiring from full-time work is helping significant numbers of people cope with rising day to day living costs and sudden or unexpected events such as redundancy or ill-health.

“Whether taking pension money before retiring is a good or bad decision depends on people’s individual circumstances, but it’s important to remember that pension money taken and spent before retirement will not be available to provide income later in life.”

Craig Rickman, personal finance expert, at Interactive Investor, said that due to the "attractive tax advantages". "Saving enough for a financially comfortable retirement isn’t an easy task," he said in a warning to savers nationwide.

"Perhaps the trickiest part is striking the right balance between living for today and funding tomorrow. None of us want to reach later life feeling like we didn’t make the most of our younger years - but we also don't want to end up with insufficient savings to retire on our own terms."