After it was announced by the Government in March that over-55s would be able to draw their pensions as a lump sum without purchasing an annuity, many are weighing up their options. A recent survey conducted by Fidelity Worldwide Investment found that a fifth of people have decided to use their pension money to help their family, including helping grandchildren onto the property ladder and paying off debt on behalf of loved ones.
Pension freedom reforms have allowed many to start considering their retirement plans and how much flexibility they now have. Another survey has revealed that some are planning on working towards a debt-free retirement by paying off their mortgage in one go. One in ten said they would pay off their house with either all or some of the funds they have already saved in a pension pot, while 58% have said they will continue to pay their mortgage monthly and make no changes. 22% made some concessions and have decided to increase their monthly repayments in the hope of clearing their mortgage debt sooner.
Many over-40s expect to have to continue to repay their mortgage
throughout their old age, with some having 30, 35 and 40 year mortgages to make payments more affordable, so it’s understandable why many will choose this option. Partnership’s head of product development Mark Stopard, has commented on “the trend towards re-mortgaging, purchasing later in life and being kept off the housing ladder by high house prices means that (owning their own home by retirement) is out of reach for almost a third of people.”
Some are more cautious though, and have voiced their concern, Partnership included, who have suggested that “the number of people who actually need to do this is likely to be far higher as unexpected events such as redundancy, illness or family emergencies cause issues.” Pension savings are, of course, designed to provide an income over a specific period, rather than be used in one go.
This statistic seems to be the tip of the iceberg in terms of the changing face of retirement, and though the new pension rules may ease the cost of old age for some, there are plenty who remain sceptical. For others, paying off various debts, looking into
investment opportunities and the holiday of a lifetime are the priorities when drawing their pension early, the various surveys have highlighted how personal a choice it really is.
