15th June 2015
While many had been expecting a massive dash for cash following the introduction of the new pension freedoms, new research shows only 13% intend to withdraw more than 50% of their pot.
Pension specialist Partnership asked over-40s what proportion of their pension pots they intended to take in cash when they retired and they typically intended to take 27% – only marginally higher than the tax free allowance.
In addition, while 45% were supportive of the freedom to cash in pension pots, 34% say that if people “blow their cash” they should not expect state support.
Those between the ages of 51 to 55, at 18%, were most likely to take more than half of their pot as cash at retirement but 31% of those aged 46 to 50, intended to take the largest proportion as cash.
The analysis also concluded that just 9% of respondents aged 56 to 60 were most likely to take their entire pension post as cash, while across all age groups questions, a mere 13% will take out more than half.
|All||40 to 45||46 to 50||51 to 55||56 to 60||61 to 65|
|Proportion of their pension pot they intend to take as cash*||27%||27%||31%||30%||29%||24%|
|Proportion who will take more than half in cash*||13%||12%||15%||18%||16%||8%|
|Proportion who will take their entire pension pot as cash*||6%||6%||8%||7%||9%||5%|
* = People were given the option to choose that they did not have a pension pot they could access in this manner so these figures represent those that can access their pots.
When asked why they wanted part of their pots as cash, 45% said that they wanted to keep it in a bank account for treats, 18% wanted to spend it on a holiday or something to celebrate retiring and up to 31% intended to repay borrowing.
While 45% of 16 to 75 year olds said that people should be able to spend their pension as they saw fit others were more cautious. A third, at 34%, said that if someone takes their pension as cash and “blows it” then they should not be able to ask for state support and 18% said that only those with medical conditions or have retired should be able to take cash out of their pension at 55.
Interestingly, people who are over-65 years old are least likely to be supportive of benefits for those who take their pension cash and spend it, a 44%, versus 25% for the under-35s.
Andrew Megson, managing director of Retirement, said: “While some have predicted a dash for cash following the introduction of the pension freedoms, most people appear to be intending to take only marginally more than they might have before. They also generally appear to be spending the cash they take out on sensible choices such as the repayment of debt, replacing their car or appliances and putting it aside for incidental costs in retirement.
“It appears that while people are keen on the idea of more pension freedom, they are still relatively prudent in their approach to spending their pots – and expect others to be as well.”