Workers ‘under pressure’ to cash in pension pots
Changes to the pensions rules in April will allow workers coming up to retirement to unlock their savings that would normally have been used to buy a lifetime plan.
The government is promoting the ‘freedom’ as the biggest revolution in pensions for a generation while advising all those wanting to access their money to get advice.
But more than one in four Scots (29%) say they expect to come under pressure to take out what could be substantial nest eggs and use it to help children get a foot on the housing ladder, pay university fees or care home support for elderly relatives.
A report, Forever Young: The New Landscape of Later-Life Planning, from the Scottish Widows think tank, the Centre for the Modern Family, revealed that more than a quarter (27%) of Scotland’s adults expect to use pension savings to fund care costs of elderly relatives or to invest on behalf of the wider family, such as in a property for children (17%).
Almost one in four (24%) Scots believe the reforms will enable people to manage savings more effectively. However, they are outnumbered by the 43% who worry that the reforms could mean not having enough money for the whole of their retirement.
Despite feeling the pressure to give up their retirement savings, 42% of Scots say they don’t know or haven’t thought about how they will survive financially in retirement. A further 14% intend to rely on state support, which could leave many financially exposed in later life.
The effect of the government’s pension reforms may be particularly burdensome on particular groups in the UK, especially those with adult children still living at home, or ‘full nesters’, who were identified as a particularly financially strained group in the Centre’s previous report, Meet the Full Nesters.
One in four UK full nesters think they will come under pressure to use pension savings not spent on an annuity to fund care costs of elderly relatives (25%), compared to 19% of empty nesters. Full nesters were also the most likely to feel under pressure to use their retirement savings for investments on behalf of the wider family (25%).
Almost a third of full nesters (29%) expect retirement savings to be used for loans to other family members, compared to 27% of empty nesters.
The report also found Scottish families are pulling together to support one another at different stages of life, and parents are increasingly looking to their children to plug the gap that loans and investments from an unlocked pension pot may leave in their retirement savings.
Over a third (39%) of Scots feel that support from children in later life is repayment for what they have provided, and 41% also believe that children have an obligation to support their parents.
This support stretches to caring and living arrangements, with 40% of Scottish adults expecting to care for their parents and one in 20 (6%) expecting parents to live with them.