Retirement woes continue
Research from Prudential highlights just how careful pensioners are with their retirement funds since the introduction of Pension Freedoms.
The Freedoms – introduced in April 2015 – allow savers to withdraw money from their private pension pots without any limit. Critics said it would lead to pensioners running out of money in retirement but Prudential’s research shows just one in 10 who have stopped work since their introduction admit to overspending.
Nearly four out of five (79 per cent) say they have used lump sums they have withdrawn from their funds wisely, a quarter have used their pensions to pay off all their debts and six per cent say they initially withdrew more than the tax-free 25 per cent cash lump sum from their funds.
Contrary to what may have been expected, they have also been careful when it comes to giving money to children and grandchildren. Only 16 per cent have helped their children with a deposit for a home and 8 per cent have helped children and grandchildren with education costs.
Lump sum worries:
About a quarter (24 per cent) say they have found it tough living on their retirement income in the past three years and around nine per cent worry that taking a lump sum has reduced their retirement income for the long term.
About half (50 per cent) of those retiring in the past three years have set a budget for spending and the longer that people have been retired the less likely they are to set a budget. Just 36 per cent who retired five to 10 years ago have set a budget while only 24 per cent who retired 10 years ago or more have set a budget.
Vince Smith-Hughes, a retirement income expert at Prudential, said: “This research destroys the myth that people would generally be reckless with their retirement funds. Most people are being very sensible with their choices.
“Critics warned that there was nothing to stop people blowing all their retirement funds in one go but the opposite is happening, and the decision to trust people with their own money has proved the right one.
“The big challenge for people retiring is making sure that their money lasts the rest of their life and it is encouraging that people are taking a responsible attitude to Pension Freedoms.
“However, retired people need a clear idea of how much money they will need and how long their retirement fund is likely to last. The best way for most people to do that is consult a financial adviser.”