Ipsos Mori have released the first survey into soon-to-be retiree’s intentions when the new pension rules are introduced in April 2015. Published in The Times, the survey showed that 200,000 were already planning how they would use the pension money they would be drawing early, which was around 12% of the 1,247 people between the ages of 45 and 65 who were surveyed.
From April, the money drawn will be entirely within the control of the person withdrawing it, and many are already putting their plans together in advance. The majority were planning on cashing in to pay for a holiday, 13% were eager to pay off debts, 12% cited DIY projects as their reason, 14% wanted to use their funds to help family, and 8% had a new car in mind. A quarter of people also said that they would save a portion of their pension savings, deciding that long-term security was still a priority.
Tom McPhail, or Hargreaves Lansdown, suggested that more guidance and protection was needed for pensioners who choose to withdraw the majority of their savings, or even all of their savings at once. A spokesperson for The Treasury claimed that “freedom is a key part of our long-term economic plan”, but McPhail warned that “we also don’t want them paying unnecessary tax bills or running out of money.”
For many, the funds drawn have investment potential for a lot of retirees, with property proving to be the most popular option. Another popular choice is peer-to-peer lending, which offers bank-beating interest rates. Money invested is not covered by the FSCS, but is regulated by the FCA. Wellesley & Co allows retirees to lend their funds and receive up to 6.67% return, whilst being protected by a Provision Fund that will compensate customers should a borrower fail to repay their loan.
Pension reforms have sparked debates as to whether or not people could end up in financial difficulty regarding their choices, with ministers having emphasised that people would be able to save, invest or even ‘buy a Lamborghini’.
With 200,000 already weighing up their options, reforms could trigger a huge flow of money into p2p investments from pension savers who necessitate an income.