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Two-thirds of retirees do not have sufficient cash to dip into, Zurich reports

21 December 2018 Written by Prosperity Financial Solutions Category: Pensions

Over 156,000 pensioners using invest-and-drawdown do not have a buffer of cash to rely on should the markets drop.

More than a third (36%) of people who keep their pension invested through retirement could be hit harder by falling markets as they do not have a cash safety-net to fall back on, according to Zurich's recent study. 64% of retirees hold their cash in reserve, although fewer than one in 10 would think to dip into it if there was a considerable drop in the stock market.

It is recommended that retirees in drawdown have a cash buffer which they can use in the event of a market correction. By taking income from cash that is held inside their pension instead of any invested assets, retirees are forced to sell investments at much lower prices.

In the Financial Conduct Authority’s (FCA) recent data bulletin, over 435,000 people have put their pension into drawdown since October 2015, meaning approximately 156, 876 people could be without adequate reserves.

In the study of 660 people, almost two-thirds of retirees (62%) reported they had sufficient cash to pay their bills for two years or more, yet nearly a quarter (21%) believe they would only be able to survive for six months or less.

Around half of the people taking an income in drawdown said they would continue withdrawing the same amount from their pot should a volatile market hit. Just 12% would scale back their withdrawal while a further 15% said they did not know what they would do.

Zurich’s Head of Retail Platform Strategy, Alistair Wilson, explained:

“A staggering number of retirees appear to be in the dark over how to protect their pension if stock markets tumble. Working out how much income to take from your pension can be a challenge, and is a decision ideally made with the help of a financial adviser.”

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