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Pension fears realised as cash blown on luxury

Pension fears realised as cash blown on luxury

Some 36 per cent of individuals who haven’t taken up pensions guidance have spent their pension pot on luxuries such as a holiday or new car, a government-commissioned survey has found.

This figure drops to 12 per cent among individuals who have had an appointment with the government's free guidance service Pension Wise.

The survey, which polled almost 3,000 Pension Wise users and non-users during 2017/18 for the Department for Work and Pensions, found savers who had withdrawn their pots used it mostly to invest in non-pension savings and investments, followed by home improvements.

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Former pensions minister Steve Webb had said in 2014 it was up to savers whether they wanted to blow their pension cash on Lamborghini sports cars after the pension freedoms were introduced. 

Figures released since then have suggested fears of such behaviour were overblown as mainly savers with small pots were seen to be withdrawing the full amounts.

But there is still a fear many retirees are finding it hard to navigate the complex pensions landscape and make the best decisions without help.

The research found 23 per cent of Pension Wise users had gone on to seek financial advice in the past 12 months.

A third of the guidance service customers (34 per cent) who had withdrawn pension money, or arranged to do so, made these arrangements via a financial adviser, while 41 per cent of non-Pension Wise customers did so.

The majority of people in drawdown (52 per cent) had an adviser, while about three in ten (30 per cent) who took a tax-free lump sum or bought an annuity were an advised client.

The research also found the majority (92 per cent) of people who had sought Pension Wise guidance were satisfied with their experience overall and seven in ten (69 per cent) were very satisfied. Just 3 per cent said they were dissatisfied.

However, face-to-face customers’ satisfaction with their appointment location was down (from 93 to 86 per cent), as was satisfaction with the venue (from 91 to 86 per cent), compared with the 2016/17 survey.

This was due to streamlining the service, and the higher customer volumes attracted in 2017/18, the DWP said.

The DWP added Pension Wise was taking steps to address the issues raised about waiting times in 2018/19, recruiting more guidance specialists and further developing the digital appointment service.