Despite fears that pension freedoms would see retirees blowing their cash on expensive purchases, fewer than one in 10 new pensioners (9 per cent) overspent or believe they will overspend in their first year of retirement, according to new research from Prudential.
Pensioners are balancing the desire to celebrate their retirement against a healthy dose of realism
In a poll of pensioners in the first year of retirement, the insurer found most people carefully striking a balance between rewarding themselves for years of hard work while also making sure their pension savings won't run out. Although many had planned to have a luxury holiday (22 per cent) or buy a car (16 per cent), the most popular plan – among 34 per cent of new retirees – was to not make any extravagant purchases.
Retirement balancing act
The survey revealed further signs that pensioners are balancing the desire to celebrate their retirement against a healthy dose of realism. When asked about their attitudes to retirement savings 44 per cent said that having worked all their life, now was the time to enjoy their money, while 36 per cent were more concerned about their retirement income lasting for the rest of their lives.
The research also highlighted some worrying signs that recent retirees may be setting themselves up for an uncertain financial future. Only one in three (33 per cent) new pensioners said they had set a budget for their first year of retirement, while 13 per cent said they had found living on their retirement income harder than they expected.
Lack of professional guidance
Perhaps most worrying of all is the fact that of those who took cash from their pension pots in the first year of retirement, 68 per cent may have put their future incomes at risk because they didn't take any professional financial advice before doing so.
Vince Smith-Hughes, a retirement income expert at Prudential, said: "It would appear that many post-pension freedoms retirees have heeded the warnings about potentially running out of money later in life and are forgoing extravagant purchases when they first retire.
"However, even those taking a more cautious approach could be risking their income later in retirement with the initial choices they make. The pension freedoms have opened up a whole new set of possibilities for retirees, but for many people hoping to make the most of the new flexibility while also ensuring they don’t outlive their savings, the help of a professional financial adviser can be very important."
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