Big Spending Pensioners Plan To Blow Their Cash

One in six 55-year-old retirement savers intend to access their pension straight away under new flexible access rules that start from April.

But many are worried their cash will not last for their lifetimes.

One in eight believe their pension cash will last just 10 years, while most have worked out that they need enough cash to last at least 19 years.

This fear is leading many to put off drawing down pension lump sums until they are at least 62-years-old, according to a study by financial firm Aegon.

Longevity statistics from the Office of National Statistics (ONS) calculate that the average 65-year-old retiring now will live until they are 84.

Realistic plans

However, this is an average, so many will die earlier while many more, mostly women, will live well into their 90s and beyond.

The firm’s managing director David Macmillan said: “The principle of giving people more control over their retirement money is without doubt good, but the worry is too many people will blow their cash and be left short later in life.

“Many people seem to have a realistic idea about how long their money will last, but 10% expect their money to last just 10 years, which is half the expected lifetime after retirement on average.”

Macmillan explained that falling back on the state pension will only give pensioners a basic lifestyle rather than the relaxing and comfortable retirement they are looking forward to enjoying.

Pension Wise

Many pension and financial advice providers are in  a state of upheaval as the April deadline approaches as the government’s new flexible access pension rules has forced them to scrap their business models and start from scratch.

Pension firms have to provide new systems to handle an expected flood of drawdown applications from April 5.

The government has also forced them to broaden the advice they give customers approaching retirement by announcing Pension Wise, a new free money advice service to help pension savers make the right financial decisions about spending their money.

Another market disrupter is the launch of government-backed pensioner bonds for the over 65s offering double the rate of interest of most bank and building society saving accounts.

For many financial firms, the way forward is to offer cheaper and more competitive products in competition with the government’s free advice service and high-paying bonds.

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