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Just 13% to take more than half of their pension pot in cash – research

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
16/06/2015

Just 13 per cent of over-40s intend to withdraw more than half of their pension pot in cash when they retire, new research reveals.

In fact, they typically intend to take 27 per cent of their pension as cash – a figure not far removed from the 25 per cent tax free allowance.

The research by retirement specialist Partnership found people aged 51  to 55 were most likely to take more than half of their pot as cash at retirement (18 per cent) but 46 to 50 year olds intended to take the largest proportion as cash (31 per cent).  Those aged 56 to 60 were most likely to take their entire pension post as cash (9 per cent).

While 45 per cent were supportive of the freedom to cash in pension pots, 34 per cent said that if people ‘blow their cash’ they should not expect state support – suggesting that retirees intend to be prudent with their pensions, and expect others to be as well.

When asked why they wanted part of their pots as cash, 45 per cent said that they wanted to keep it in a bank account for treats, 18 per cent wanted to spend it on a holiday or something to celebrate retiring and up to 31 per cent intended to repay borrowing (17 per cent for debt, 14 per cent mortgages).  Replacing their car (16 per cent) or household appliances were also a priority (11 per cent).

“While some have predicted a dash for cash following the introduction of the pension freedoms, most people appear to be intending to take only marginally more than they might have before,” said Andrew Megson, managing director of retirement at Partnership.

“They also generally appear to be spending the cash they take out on sensible choices such as the repayment of debt, replacing their car or appliances and putting it aside for incidental costs in retirement.

“It appears that while people are keen on the idea of more pension freedom, they are still relatively prudent in their approach to spending their pots – and expect others to be as well.”

  All 40-45 46-50 51-55 56-60 61-65
Proportion of their pension pot they intend to take as cash (per cent) 27 27 31 30 29 24
Proportion who will take more than half in cash (per cent) 13 12 15 18 16 8
Proportion who will take their entire pension pot as cash (per cent) 6 6 8 7 9 5

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