16th January 2015
Retirees are feeling under pressure to use the pension freedoms to access their savings to help families members.
From April those aged 55 and over will be able to access their pension savings as a lump sum as the need to buy an annuity is removed.
While the freedoms have been widely welcomed, a survey by Scottish Widows’ Centre for the Modern Family shows it could put pressure on some retirees who feel they should use the money to help loved ones, leaving them with insufficient money to live on.
Of those surveyed one in five over-55s plan to use their retirement savings to help their family members, such as providing a deposit for a home for children.
A quarter with ‘boomerang kids’ – who have left the family home and returned – plan to spend the money on their families. There are also individuals who want to help older relatives, with 22% of those aged over-55 expecting to use the money to pay for elderly relatives’ care.
Using pensions to help relatives may be a selfless thing to do but it could have repercussions for those giving their money away, leaving individuals struggling in retirement.
A total of 39% believe the new pension freedoms may mean people do not have enough to live on in old age and have to rely on their families more, although 30% believe it will help people manage their retirement savings better and rely less on others.
Carolyn Fairbairn of the Centre for the Modern Family said: ‘The reforms to the pension system announced in the 2014 Budget are transforming the retirement landscape.
‘Although for many, they will represent greater autonomy over how to use their savings in later life, it is important to consider the knock-on effects on families. Many may feel pressure to access their pots to support struggling family members in an already challenging economic environment.
‘While it is reassuring that family members are seeing the importance of pulling together in this way, it is vital people are aware of all the short and long-term implications for retirement pots.’