There are fears that a growing number of people could face being "pension poor" in retirement, with research finding that many could be under pressure to lend family members money if they unlock their retirement pots in April.
According to a report from Scottish Widows, the pension freedoms could have a knock-on effect on intergenerational finances, particularly if they take full advantage of the reforms and withdraw the cash. The figures show that 23% of those surveyed expect to use pension savings to help fund the care of elderly relatives, while 22% expect to invest on behalf of family members, such as helping to buy a property for their children.
As such, there are concerns that the reforms could lead to financial difficulties in later life, as despite 23% of Brits surveyed believing that the reforms will mean people are able to manage their money effectively, a far higher percentage (39%) worry that they could lead to people not having enough money to last for the whole of retirement.
Arguably, the best way to avoid being pension poor is to resist the temptation to release your savings. Happily, additional figures from Portal Financial show that just 9% are sure they want to cash in their pot at retirement, with 65% being absolutely certain that they won't.
Of those that do, the majority have a pressing need for the cash – 34% will be using it to pay off a mortgage or other debt, while 20% will be using it for home improvements – meaning relatively few will have the capability to spend frivolously or help out family, with just 9% saying they're planning to give money to their children.
It seems that securing a guaranteed income will still be a top priority for a large number of retirees, and that's one of the best ways to avoid running out of cash. Annuities could still have a prominent place in the market, or if you want to make the most of the new flexibilities and are thinking about income drawdown, getting the right kind of advice is key.
Jamie Smith-Thompson, managing director at Portal Financial, commented: "Most people are not looking to blow all their cash in one go, [but instead] tend to want to make a sound financial decision, being well aware of how hard they have worked to earn these savings.
"Our findings do highlight a general confusion over the implications of the new rules, [but] the good news is that fewer people are saying they will cash in than was previously thought. Given the risk of making the wrong decision and the amount of confusion in the market, it is clear that getting sound financial advice has never been more important."
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