A study by True Potential Investor shows that the main reason given by over 55s for making withdrawals under Pension Freedoms has been to reinvest in search of better returns.
While some have opted for overseas investments, alternative pension funds or ISAs, 42% have reinvested their money into new property purchases or improvements.
In total a third of respondents has withdrawn to reinvest, while a quarter has paid off debts and a fifth has used pension withdrawals as income.
However the overall take-up of Pension Freedoms has been relatively small so far, with just 10% of eligible savers making withdrawals from their pension fund.
True Potential Investor believes that the cost of advice and the difficulty in accessing pensions is to blame.
Managing Partner, David Harrison, said:
“Accessing your pension pot sounds simple but the reality is quite different, largely driven by the costs involved. The volume of advice and evidence gathering required can mean someone with a pension pot of £20,000, may have to pay well over £1,000 just for the advice. That is undoubtedly off-putting and unnecessary.
“A simple solution would be to cap the annual charges on income drawdown pensions. That would reduce the volume of advice required and therefore the cost, opening up these freedoms to more people.”
