Less than a year after George Osborne’s reforms allowed people to raid their pension pots, research shows almost one in five have spent it all already
One in five over-55s who were allowed to cash in their pensions following chancellor George Osborne’s radical 2015 reforms have spent the money already.
Research by the Pensions and Lifetime Savings Association (PLSA) found that 18 per cent of those who were allowed to take cash lump sums from their retirement savings have already used the funds.
Home improvements was the main expenditure for those who plundered their pension pots, with 32 per cent sprucing up their abodes using the cash. Meanwhile, a further 18 per cent bought one-off purchases, while a quarter used the money to pay mortgages or loan debt.
Despite this, over half (51 per cent) of those who accessed their funds had decided to either save or invest it elsewhere.
Since April 2015, those aged 55-and-over can take cash lump sums from their pensions, rather than exchanging their savings for an annuity. They can take up to a quarter of this withdrawal tax-free, but tax is payable on the rest.
According to HM Revenue & Customs, 188,000 over-55s took a total of £3.5bn in cash from their pension funds in the nine months to 31 December 2015.
Scottish Widows retirement expert, Lynn Graves said: “While we saw an initial surge from the pent up demand for accessing cash under Pension Freedoms, in our experience only a small proportion of those able to take action have done so.
“Cashing pensions in has tended to be more popular among savers with smaller pots. We encourage all savers to do their research, seek appropriate guidance and consider financial advice before committing to a decision on how and when to take their pensions. Our Retirement Planning website is a good place to start.”