Pensioners blow cash on luxuries

More than three quarters of UK pensioners (76 per cent) with private or company pension schemes are taking lump sums out of their pension pots, averaging £24,154, as they reach retirement but astonishingly many are then blowing the money on luxuries or giving it away.

The findings from new research developed for Prudential comes despite the well publicised gap between people's retirement savings and the amount they need to live on comfortably in retirement.

Of those who had taken a lump sum from company or private pension funds, a staggering 13 per cent said they had given all or part of the sum to their children with 4 per cent giving money to other relatives and dependents. A large proportion had also used the money to treat themselves with 17 per cent using it to buy a new car, 31 per cent using it to fund home improvements, 18 per cent buying a holiday and 14 per cent just treating themselves to things they've always wanted.

Gary Shaughnessy, Prudential Managing Director, Retail Life & Pensions, said: "Before giving away money from their pension at the point they retire, people should think about the repercussions. While they may feel at their most financially secure, they should think about how long they will live in retirement, and how long their pension pot has to sustain them. They should also consider the effects of inflation, increasing living costs and the potential cost of care. Even in retirement, people have to plan for the longer-term or they run the risk of their finances becoming increasingly strained.

"As a result, we would urge people to think very carefully about spending lump sums in the early years of retirement and instead encourage them to look at other options, such as investing the money in savings schemes that can be used to supplement their retirement income while maintaining the capital."