A survey has been conducted by Citizens Advice of 501 people over age 55 who have taken advantage of pension freedom since April 2015. (source: Professional Adviser 25th August 2016)
The report found that 32% of people surveyed with pensions worth in excess of £100,000 have simply ‘transferred’ their pensions into bank accounts.
Other findings include:
22% of people accessed their ‘pots’ for luxury spending.
35% of them claim the new pension freedoms have improved their retirement prospects
52% say that pension freedom has not affected their prospects
29% of those aged between 65 and 70 feel better off because of the freedoms while 42% of those aged 55 to 59 feel they are better off
Only 5% of the surveyed say pension freedom has made their prospects worse
77% of those who feel they are better off say having control over their money is a factor
One pension insider described some of the findings as ‘shocking’ but are they?
For me what would be more ‘shocking’ would be to go back to the bad old days when the State restricted your access to your own money. If anything I am pleased to see that many people are enjoying their hard earned pension money.
That said this survey does demonstrate a need for greater understanding and advice at retirement. It is worrying that so many (32%) of those with (or rather had) over £100,000 in pensions simply have it sitting in bank accounts. There is a need, of course, to use bank savings accounts to hold some money, but too much earning paltry interest rates at under the rate of inflation, is not a good idea even without considering the full tax consequences of cashing in a pension just to do that.
It is essential that people get good advice when it comes to investment assets in retirement whether those assets are pensions or not. It can make a world of difference.
Past performance is no indication of future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. The tax treatment of a particular investment depends on the individual circumstances of each investor and may be subject to change in the future.