The Pensions and Lifetime Savings Association (PLSA) has published its latest wave on patterns in retirement following the pension reforms and the results are a mixed bag.
The PLSA undertook an initial survey of 1,042 adults and a further survey of over 2,000 – both aged between 55 and 70. It found that 14% of respondents had accessed their pension savings for the first time under the freedoms.
The PLSA found that 32% have spent money on home improvements, which has proved more popular than big one-off spends on holidays or cars, with just 18% spending money on these items. 12% used the money to pay down mortgage or loan debt.
The PLSA’s survey of savers aged 55 to 70 concluded that while roughly three in four of this group have saved or invested at least some of their cash, many have kept it in bank accounts with interest rates as low as zero. According to Nathan Long, head of corporate pension research at asset manager Hargreaves Lansdown, the “absolutely terrible” interest rates available on the high street means that leaving money in such accounts is “not a very joined up” approach to financial planning. 61% of the respondents who set aside their cash reported that they had kept it in current or savings accounts, including ISAs, rather than investing in shares or property.
Drawdown products have proved to be the most popular option, with 43% making use of them and a further 32 per cent buying annuities.
The ‘do nothings’
Of course, just because there is now the freedom to draw on your pension, it doesn’t mean you have to. 23%, that’s 630,000 people, have taken no action and didn’t even consider doing anything with their pension pot. Mr Long noted that for many people, the combination of tax on pension withdrawals and low interest rates on cash means their money may be better left in their pension pots until it is needed.
Little advice taken
The government-backed service, Pension Wise, isn’t as popular as the government may have hoped, with only one in five people who have accessed their pensions using the free service, according to the PLSA. This is roughly half the number of people who have sought professional advice.
Overall, the PLSA concluded that there is “little evidence of reckless spending or stripping of pension pots”, and note that the vast majority haven’t taken the money and are opting for a steady income in retirement with their pension wealth.
After all the fanfare, perhaps people really are thinking long term about their increasing years in retirement.