Almost two in five (38%) over-55s said they have no plan for the tax-free cash from their pension, new research from Hargreaves Lansdown has revealed.
This compares to 17% who said they would put the money in a cash ISA, while 16% said they would use it to supplement their retirement income.
A further 14% said they would put it in cash savings such as an easy access account, with 7% stating they would leave it in a current account.
Despite the Government push to get more people investing, just 8% of those surveyed said they would invest the money by putting it in a stocks and shares ISA, while 2% would invest the money outside an ISA.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “The ability to take up to 25% of your pension tax free is a huge plus point but you need to have a plan for what you want to do with it. Taking it all at once just because you can puts you at risk of poor decision making and you may not make the most of it.
“Phased drawdown allows you to take your tax-free cash in portions while leaving the rest invested. This can help you manage your tax bill as well as give you time to think about how you can make best use of your money.”
The research also found that almost one in 10 (8%) said they would use the money to gift to family, possibly prompted by the inclusion of unused pensions in people’s estates for inheritance tax purposes from April 2027.
Morrissey added: “Gifting can be a great way of helping your loved ones to reach their financial goals that bit quicker while also reducing an inheritance liability. However, it’s important not to gift too much too quickly – or feel you must – as you may leave yourself in financial difficulties later.”
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