‘Little reason’ to worry retirees are blowing pension pots

THERE is “little reason” for concern that retirees are using new-found pension freedoms to blow their savings pots, according to an insurer’s analysis of customers who have taken financial advice.

Royal London looked at data from a sample of more than 17,000 customers who were supported by financial advice to see how they were handling their drawdown pots in retirement. More than a third were taking out between three and six per cent of their pension pot per year, seen as a broadly sustainable amount.

The pension freedoms were introduced in 2015 to give over-55s a wider range of choices over how they use their pension pot.

Royal London’s analysis looked at customers whose adviser was using the firm’s drawdown governance service, which provides advisers with quarterly assessments on how sustainably people are using their pension pots.

It found more than a quarter were withdrawing four to six per cent per year, with 13.79 per cent withdrawing four to five per cent, and 13.31 per cent taking five to six per cent.

A further 9.71 per cent were withdrawing between three and four per cent. At the other end of the spectrum, one in six (16.88 per cent) were taking out over 10 per cent.

These people tended to have much smaller pots, suggesting the money was not being used to support people throughout retirement and that there were other larger sources of income they were relying on, Royal London said.