Car dealers and travel agents can expect a boost in sales next year as one in five retirement savers plan to spend their pension cash on life’s luxuries.
Holidays and cars top the wish-lists of many retirement savers who will be able to unlock their pension savings from the age of 55 from April 2015 under a new law proposed by Chancellor George Osborne and pensions minister Steve Webb.
Self-invested personal pension (SiPP) provider Liberty polled 600 pension savers – and 20% are already planning to part-exchange their cars as soon as the new law comes into force, while 12% are already busy planning trips abroad.
Webb has already displayed little consideration over the way retirement savers may spend their pensions from next year.
“If they want to blow the lot on a yellow Lamborghini, then that’s up to them,” he has said.
Annuities out of favour
Although car dealers and travel agents can expect a bumper year, the same cannot be said for annuity providers, according to the survey.
Only 7% confirmed that they are looking to invest in an annuity.
An annuity is an insurance contract offering a guaranteed income for life to retirees. The investments have fallen out of favour due to poor returns and high charges in recent years.
Last year, the government changed pension rules that insisted savers had to buy an annuity with their pension funds once they reached the age of 75 years old.
Another 3% expressed their generosity by telling the researchers that they intend to give some or all of their pension cash away to friends or family.
However, the majority of pension savers said they had no plans to blow all their retirement savings.
The firm revealed 58% of retirement savers will keep their money invested to generate an income for their later years.
Unlocking pension cash
The report echoes the results of a similar poll in Australia, where pension laws already allow savers to spend their cash as they wish once they reach retirement age.
There, 19% of savers spent cash on cars while one in 12 went off on travels.
John Fox, Liberty SiPP’s managing director, said: “Unlocking pensions and letting savers decide how they spend their money is a revolution.
“Although many will spend their cash on luxuries, many still plan to hold back their cash and invest for their retirement.
“It’s interesting that the figures for spending and investing are almost the same in Britain as in Australia.”