However, new research from pension and retirement specialist Friends Life reveals only 7% of people say they will actually take 100% of their funds, contradicting concerns that with these new financial freedoms people would spend irresponsibly.
Under the changed pension regulations, the average amount people said they would release at retirement was 33%. One in four (25%) would consider taking 50% or more of their pension pot in cash at retirement. But far from blowing it on Lamborghinis, a quarter (24%) of people plan to reinvest the money making it critical to access the information and support they need to make informed decisions.
Consumers told Friends Life that they are most likely to reinvest in the new ISA (22%), BTL property (21%) or stocks and bonds (14%).
The research revealed that over a quarter (28%) of future retirees are struggling to understand this new financial freedom and don’t know where or how they will reinvest the money released from their pension pot.
David Still, Managing Director Retirement Income at Friends Life, said:
“While from next year retirees could spend all of their pension savings in one go, our research shows securing long term financial security remains the most important consideration for the vast majority of people. Managing money to ensure it lasts throughout retirement is hugely important and our research suggests that consumers understand they have to be responsible for their future. To be as prepared as possible, people should ensure they seek guidance and thoroughly investigate all their options.”
According to the Friends Life research, there remains confusion around the tax implications of releasing funds. The tax-free window for 25% of funds will continue under the new plans, but almost two-thirds (65%) of people questioned are not even aware of this tax break now.
The most popular reasons why Britons would draw down from their pension fund include paying off mortgage (24%) and reinvestment (24%), as well as those who said they would go on once-in-a-lifetime holidays or set it aside for a rainy day.
David Still added:
"Retirees now face a huge range of options. We’ve found that while this is refreshing for some, for others the changes and increased choice have created confusion over what the best course of action should be. We encourage people to seek guidance on what their options are to ensure they are in a position to make an informed decision."
