Pension Withdrawal Warning

A new warning has been given on the rates that people typically withdraw cash from their pensions. As life-expectancy is increasing, the rates that used to be recommended could now be over-optimistic. Research by pension company Aegon suggests that one in five people risk running out of money in their pension.

Morningstar reports

“Aegon said that many people have not sought financial advice on their retirement options. Instead some have relied on older calculations which suggest that taking a 4% income is sustainable over the long term… This “4% rule” was developed by US adviser William Bengen in 1994, and has often been used as a rule of thumb for determining a sustainable level of retirement income. However, Aegon’s research found that in today’s economic climate a 65-year old with a low-risk portfolio has a one in five chance of running out of money over 30 years if they follow this strategy.”