Approximately one in seven (13 per cent) UK adults that are looking at ways to increase their income amid the cost-of-living crisis expect to access their pension earlier than planned or have already done so, research from Canada Life has found.

Canada Life’s survey looked at how people planned to increase their incomes to make ends meet as the rising cost of living squeezes the personal finances of many.

It found that more than half (55 per cent) have implemented or are looking at ways to boost their incomes, equivalent to 28.9 million people.

Selling unwanted belongings was the top way adults planned to increase their income (36 per cent), followed by looking for a better paying job (28 per cent) and looking for a second paid job (28 per cent).

However, many were also looking to dip into their personal finances, with 22 per cent of those looking to boost their income using or planning to use savings or investments, 13 per cent accessing or planning to access their pensions earlier than expected, and 10 per cent accessing or considering accessing equity in their home.

Following the findings, Canada Life technical director, Andrew Tully, urged the pensions industry to make sure that people are aware of the tax and cost implications of accessing their pensions earlier than planned.

“The cost-of-living crisis is causing the majority of people to re-evaluate their financial situation. And, with inflation set to reach double-digits later this year, we can expect to see more individuals tightening their belts and looking for additional ways to supplement their income,” he stated.

“However, with the research showing that over one in 10 adults are looking to access their pension early, we, as an industry, need to ensure that these individuals are aware of the tax and cost implications of doing so. Not only will your pension have to stretch further into the future, you are likely to pay tax and you can also trigger the Money Purchase Annual Allowance (MPAA).

“The use of emergency tax on initial withdrawals may mean people initially receive less than they were anticipating, and have to wait for HMRC to pass on the remainder at a later date. It’s worth keeping mind if you plan on topping up your pension in the future the MPAA restricts the amount you can to £4,000 a year, which includes both you and your employers’ contributions.

“While it’s hard to predict how long inflation will remain high, it’s vital that we encourage people to look beyond the here and now, and look at their finances over the medium to long-term. For those concerned about their financial future, speaking to a financial adviser is a sensible step. These professionals can help give a holistic view of your personal circumstances, ensuring that you are on track to achieve your financial goals.”

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