Pensioners regret taking lump sum
Research published today (13 July) by Prudential found 43 per cent of pensioners say they are living a "cautious" retirement as they worry about having sufficient long-term income to get by.
Despite these concerns the survey of 1001 retired adults found 79 per cent of those drawing a company or private pension in 2011 took a lump sum from their fund at retirement, compared with 76 per cent three years ago.
Prudential said for many, the option to take a lump sum at the point of retirement is the most tax-efficient way to access some of their pension fund.
However, the way in which pensioners use the money from their lump sum was often shaped by concerns around long-term retirement income.
More than half of those who had taken a lump sum put some of the money in a savings account and just over a quarter invested in stocks, shares or investment trusts.
Vince Smith Hughes, head of business development at Prudential, said most people with a company or private pension fund choose to take a tax-free lump sum at retirement and for many this proves to be the right thing to do.
He continued: "However, some pensioners are beginning to regret the way they used the tax-free cash. The days of buying a shiny new car or going on a once-in-a-lifetime holiday may be gone, to be replaced by making savings and investments with the lump sum to supplement retirement income.
"There is no one-size-fits-all answer to the financial choices that people need to make when they retire.
"For example, spending the money from a tax-free lump sum and taking a level annuity with the balance of your fund will effectively fix the level of your retirement income - and for some this may provide the stability they need.
"Others may wish to explore more flexible retirement products that take into account the effects of inflation."