New research from Quilter has revealed the damaging impact Budget speculation can have on pension savers.
According to the wealth manager, three in five (61%) retirees who withdrew tax-free cash from their pension ahead of last year’s budget say they regret doing so.
Based on a survey of 5,000 UK retirees, the research shows that more than half (57%) withdrew tax-free cash ahead of the budget, and of those, 41% did so in anticipation of possible rule changes.
Pensions became a focal point in the run up to last year’s budget, with widespread speculation suggesting that the 25% tax-free lump sum could be reduced or capped. The uncertainty was compounded by the wider fiscal backdrop, with the Government under pressure to raise revenue.
As a result, Quilter said many retirees interpreted the lack of reassurance in the run up to the Budget as a signal that a change to pensions tax-free cash was likely, prompting pre-emptive withdrawals.
The research also explored how the tax-free cash was used. One in six (15%) said they spent the money on renovations or home improvements, while the same proportion used it to cover healthcare or other costs. A similar number (14%) said they gifted it to grandchildren or great-grandchildren or towards their education.
Jon Greer, head of retirement policy at Quilter, said: “This data shows how speculation ahead of last year’s budget led many retirees to act out of fear of losing what is a vital component of their retirement provision rather than genuine need at that moment. The fact so many regret doing so highlights the real harm that can come from making decisions driven by rumour.
“This research underlines just how sensitive retirement planning has become to continuous budget speculation. Those saving towards and planning their retirement need and deserve certainty, and there should be a clear commitment to avoid another prolonged period of speculation ahead of future budgets.”
Greer said earlier and clearer communication could have avoided unnecessary worry and poor decision making and warned that lessons must be learned ahead of future budgets.
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