Older people are holding on to pension pots
24th August 2015
Despite being granted the freedom to access pension pots, it would appear that many older people are wary of spending the money they are now able to use. It was initially thought that older people may use the abolished tax rules to be extravagant with their savings, but it seems that many are opting to be sensible by investing in the future.
It has been reported that pensioners are choosing to make smaller purchases such as electrical wheelchairs and reconditioned stairlifts, rather than splashing out to buy sports cars and other luxuries. It would seem that older people with smaller pension pots are more likely to access their cash, in order to help out children and grandchildren, or fulfil other immediate needs.
The average pensioner has been withdrawing £15,000, which is enough to cover short-term investments or pay off any outstanding debt, but not enough to form a viable long-term pension. Since April, a combined total of £300 million has been withdrawn by older people, showing that there is a significant demand for the cash but maybe not as much as expected.
Initial worries that pensioners would fritter away their money on luxury items like “a Lamborghini” dismissed
It would also appear that many pensioners are choosing to sit tight with their savings, making sure to research thoroughly before making any decisions. However, it has also been suggested that certain pension schemes have been unable to keep up with the demand of withdrawals, so there could be hundreds of thousands waiting to be completed due to a delay in administration.
While the new rules have been welcomed by the majority of pensioners, it has meant that numerous annuity providers have suffered. Earlier this week, it was reported that two of the larger companies were merging, in order to salvage their businesses. Annuity was already suffering prior to this due to low yields caused by an era of low interest rates, with the sales of annuity halving since the government reformed its policies.
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