Over a third (36%) of those aged between 60-78 said they have no plan for their pension tax-free cash, according to research from Hargreaves Lansdown.
The findings come as rumours continue to swirl around potential changes to pensions in the Autumn Budget and concern that pension savers may make knee-jerk reactions.
Just under one in six (17%) said they would put it in cash savings such as an easy access account, while 6% stated they would put it in a current account.
The same number (6%) said they would put their tax-free cash into a stocks and shares ISA.
Hargreaves Lansdown said other uses include holidays (8%), supplementing retirement income (18%) and giving money to family.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Rumours around pension tax-free cash continue to put people at risk of knee-jerk reactions they may come to regret. There will of course be people who are taking their tax-free cash as part of a long-term plan – for instance to go on holiday, carry out home renovations or gifting money to loved ones.
“However, doing so without a plan risks poor outcomes with the research showing over one third of those aged 60-78 didn’t know what they would do with it.”
Morrissey warned that taking money out of the tax efficient pension environment also risks exposing people’s money to a variety of taxes such as capital gains and dividend tax.
“Rumours can be worrying but it’s important not to react in haste to something that may not even happen. This is money for your long-term future that needs to be planned for carefully, otherwise you could be left counting the cost. This could be due to missing out on investment growth, poor interest rates and tax charges that come out of nowhere.”
Morrissey added: “It’s important to highlight those who take their tax-free cash with the view that they could just reinvest it back into their SIPP should the change not happen. This is something that leaves them at risk of breaching pension recycling rules that could leave them with a sizeable tax charge that could potentially undermine their retirement planning.”
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