Pensions freedom day
Only one in ten likely to cash-in pension savings
A study reveals that 9% plan to take their entire pension as a cash lump sum, easing fears that many pensioners could spend their entire savings in the first few years of retirement.
This is the so-called Lamborghini syndrome whereby retirees plan to blow their pension on fast cars and other luxuries.
However, there is still indecision among 55% of those who, from Monday, will get greater freedom over their pension. The changes will make it easier to draw cash rather than be forced into buying an annuity, or a policy for life.
A further quarter (27%) said they will wait to see what new products will be available.
Of those with a pension pot, a quarter (23%) want to take a tax free cash lump sum, one in ten (12%) plan to use drawdown and similarly one in ten (12%) are planning to take out an annuity
The indecision over the new choices, demonstrates that most retirees will want help navigating the new retirement income landscape. Pension Wise, the government’s impartial guidance service, is set to be the most popular choice with one in five (20%) over 55s with a pension pot already saying that they plan to use it.
Some 15% are planning to speak to a financial adviser with a further 15% saying they will seek advice and information online.
Nearly one tenth of over 55s with a pension pot are planning to take a mix of two or more different financial products for their retirement. This might include using some of the savings to fund an annuity to provide a level of guaranteed income, and using a drawdown product to add flexibility.
One in three over 55s have no private pension savings, but of those that do the average savings is £59,000, rising to £65,500 for men and decreasing to £47,100 for women. When planning how to use these savings in retirement, a fifth (18%) plan to spend their money on travelling, whilst one in ten (12%) expect to use the cash for everyday expenses and similarly one in ten (12%) will use the money to pay debts and bills.
John Perks, Managing Director of LV= Retirement Solutions, said: “Those approaching retirement will have more choice as to how they use their pension fund. We believe these changes present a great opportunity to change the retirement landscape for the better, giving customers more choice and control over how they manage their retirement income, and we believe the Government has taken a bold and positive step here.
“We support any initiative that encourages consumers to shop around to get the best value and Pension Wise will play an important role in informing people about the new freedoms and the ways they can fund their retirement.
“There is also an important role for regulated advice to ensure those approaching retirement make the most of the savings they have spent a lifetime building. As well as accessing Pensions Wise we’d urge people to speak to a financial adviser to ensure they get the right financial solution for their retirement.”
Picture: Lamborghini Huracan (wired.com)