Two-fifths of over-55s are transferring their pension money to their current accounts and missing out on bigger retirement savings, according to a new survey.
The report, from Fidelity Personal Investing, found 41 per cent of people in this age bracket, and across gender, income and regional demographics, are taking advantage of new pension freedoms – while subjecting their nest-eggs to inflation and low interest rates at the expense of tax-free retirement savings.
Customers – even those aware of the risks of touching their pension money – are paying off debts or treating themselves to a holiday with their retirement savings. While three-quarters (73 per cent) of those surveyed said they were worried about low-interest rates where their pensions were concerned.
Elsewhere, factors ranged from worries about market volatility (64 per cent), concerns about changes to pension policy (59 per cent), worries about Brexit (47 per cent), and concerns about US president Trump (45 per cent).
The new pension freedoms, introduced in April 2015, have given over-55s more autonomy over their retirement pots, including access to invest-and-drawdown schemes.
However, financial advisors say the best thing they could do is not to touch their money at all – and certainly not transfer it into a current account.
Retirement savings – expert view
Says Maike Currie, investment director at Fidelity Personal Investing: “Our calculations show if you had invested £15,000 into the FTSE All Share index five years ago, you would now be left with £23,288.
If, however, you had invested £15,000 into the average UK savings account over the same period, you would be left with a paltry £15,122.”
According to Currie, who recommends putting money into a stocks and shares Isa instead, low interest rates and rising inflation are proving a “toxic combination” for those with pension pots. “It’s concerning that retirees worry about low interest rates but then still choose to leave their hard-earned pension savings languishing in cash.”