Pensioners are warned over £9.2bn splurge

PENSION savers are using their retirement funds to splurge on new cars, holidays and home improvements, analysis of official figures has revealed.

Latest research shows more than 500,000 people have cashed in £9.2billion in total from their pension pots in two years since new “pension freedom rules” were launched in April 2015, with an average of three payments each.

But yesterday financial experts warned that people are in danger of running out of money in their old age if they spend too much.

Keith Richards, of The Personal Finance Society, said: “Women can expect to live until they’re 89 on average and men until 87.

“This is a long time in retirement and clearly there are real concerns that money will run out in later life when it is most needed.

“These pension freedoms have brought many benefits, but retaining a defined benefit pension can provide certainty, a guaranteed income for life and degrees of inflation protection.

Luxuries

“We would urge consumers to think carefully about their future retirement and care needs and to live within their means in light of the probability of living a longer life than the generations before them.

“Planning, in many cases for up to 30 years in retirement, is critical, as well as seeking professional advice.”

Latest analysis shows of those aged over 55, who are allowed access to their pensions, 28 per cent spent the money on extending or decorating their property, 19 per cent went on holiday and 13 per cent bought a new car.

Just 12 per cent paid off their mortgage or other debts, 26 per cent put the money in a savings account and 19 per cent invested the money elsewhere.

Paul Wilcox, chairman of investment specialist the WAY Group, said: “There is a school of thought that ‘life experiences are more valuable than assets’.

“I am sure that is true, but only to those who have all other bases covered. The worrying bit is those who are taking the cash to spend on luxuries.

“Once those ephemeral pleasures have faded into nostalgic memories one still has to live – probably for a long and increasingly financially uncomfortable period of retirement.”

ACCORDING to the latest figures, 500,000 people have taken money out of their pensions since flexible access rules were introduced in April 2015. This has sparked fears that some people could be in danger of running out of money during their retirement.

This is a good policy and the Government was correct to assert that people should have the right to do what they want with their savings.

However, with this right comes the responsibility to think of the future, invest wisely and ensure that one does not become overly reliant on the state for financial support.