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29% of pension holders draw cash to put in savings account

3 April 2018

Over a quarter of consumers have withdrawn cash through the pension freedoms to simply put in a savings account, citing fear of rule changes, new research from Retirement Advantage has shown. 

The research found that 29% of consumers put money in a savings account, while 25% used the money for home improvements. The third most popular option (18%) was paying off a non-mortgage debt, while 17% chose to use the money to go on holiday.

Over one in 10 (14%) used the money to pay themselves a regular income, with 12% opting to use the money to buy a new car. Paying off the mortgage was cited by 11% of respondents.

A smaller proportion of people used the money to help their family, with 8% choosing to gift some money to children and 6% helping family members on to the property ladder. A further 2% gave a gift to their grandchildren.

Of those who had used the freedoms to take some cash, 43% felt it was nice to have a bit extra to spend, while 36% said they needed the money. One in five (19%) withdrew cash from a sense of concern over the regulations changing.

Andrew Tully, pensions technical director, Retirement Advantage, said: “A picture is emerging of significant taxable cash sums being withdrawn under the pension freedom rules, driven by desire and necessity. More worrying is the significant number of people telling us they are taking the cash because of a concern that the regulations will change in the future. Taking money out of a tax advantaged pensions environment to put the money in a savings account is rarely a great idea. But I can understand why people are concerned about moving goal-posts as pensions have been a political football for many years.”

As the pension freedoms approach their third anniversary, Tully warned that while they provide greater flexibility they also add a “whole new level of complexity to catch out the unwary.”

He added: “Cash is king, and Government coffers continue to benefit from the additional up-front tax take. More people are going it alone with DIY drawdown, rather than seek professional financial advice, while scammers and conmen continue to prey on the market.”

 

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