Latest research from one of the UK's largest retirement specialists, Portal Financial, shows that just 9% of people with pensions are sure they want to cash them in at retirement, while a quarter of respondents need more information to make a decision.
This is in contrast to last night's airing of "How to blow your pension" on Channel 4's Dispatches, which left viewers concerned that a large number of people would rush to withdraw their entire pension.
The research reveals that 65% of people are absolutely sure they will not be cashing in their pension.
Of the 9% of people that plan to, it is often because they have a pressing need for the money, with very little sign of frivolous spending; 34% will be using it to pay off a mortgage or other debt, 20% will be using it for home improvements, 14% to invest the money, 11% to take a holiday, 9% to help their children and just 7% to purchase a new car. The fear of pensions being emptied to buy Lamborghinis is unfounded.
Interestingly, there was no difference in responses from men and women on whether they intend to cash in their entire pension fund.
Portal Financial expects the number of people planning to remove their whole fund to reduce further once the individuals learn of the tax implications of doing so, which could see them sacrifice up to half of the fund to HMRC.
The research also highlights that as people approach normal retirement age they are far less likely to want to cash in their pension in one go. Just 2% of people aged 65 and over plan to cash in their pension, compared to 9% of people aged 60-64 and 12% of people aged 55-59.
Maybe surprising was that lower income households were the most likely to want to definitely keep their pension for income (69%). The top earning households were the most likely to be unsure of what to do (36%), and households with incomes in the £40k to £70k bracket the most likely to want to cash it all in (15%).
Jamie Smith-Thompson, managing director at Portal Financial, says:
"We have specialised in income drawdown for many years and we know that most people are not looking to blow all their cash in one go. Rather, they tend to want to make a sound financial decision being well aware of how hard they have worked to earn these savings.
“Our findings do highlight a general confusion over the implications of the new rules and this can probably be put down to an almost complete absence of government education on the matter. The good news is that fewer people are saying they will cash in than was previously thought. Given the risk of making the wrong decision and the amount of confusion in the market, it is clear that getting sound financial advice has never been more important."
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