Prudential Reports Retirement Income Worries And Lump Sum Regrets For Pensioners
Released on: July 29, 2011, 9:39 am
Prudential has conducted new research that shows more than two
in five pensioners (43 per cent) say they are living a 'cautious'
retirement as they worry about having sufficient long-term income to
However, despite concerns about making their retirement pots last, the majority of
pensioners still take a tax-free lump sum from their pensions when they retire. Nearly
eight out of 10 (79 per cent) of those drawing a company or private pension in 2011
took a lump sum from their fund at retirement, compared with 76 per cent three years
The research, exploring the retirement reality
for pensioners in 2011, also found that one in 10 (10 per cent) of those who did
take a tax-free lump sum either said they now regret the decision or that they had
not fully understood the long-term impact it would have on their retirement income.
For many, the option to take a lump sum at the point of retirement is the most
tax-efficient way to access some of their pension fund. However, the way in which
pensioners use the money from their lump sum is often shaped by concerns around
long-term pension income.
More than half (52 per cent) of those who had taken a lump sum put some of the money
in a savings account and just over a quarter (26 per cent) invested in stocks,
shares or investment trusts.
Vince Smith Hughes, Head of Business Development at Prudential, said: "Most people
with a company or private pension fund choose to take a tax-free lump sum at retirement, and for many this proves to
be the right thing to do. However, some pensioners are beginning to regret the way
they used the tax-free cash. The days of buying a shiny new car or going on an
once-in-a-lifetime holiday may be gone, to be replaced by making savings and
investments with the lump sum to supplement retirement income.
"There is no one-size-fits-all answer to the financial choices that people need to
make when they retire. For example, spending the money from a tax-free lump sum and
taking a level annuity with the balance of your fund will effectively fix the level
of your retirement income - and for some this may provide the stability they need.
Others may wish to explore more flexible retirement products that take into account
the effects of inflation.
"There does, of course, need to be a balance. Many people want to spend their
at-retirement lump sum in a way they have looked forward to for many years. Those
who are planning to retire in the near future and are uncertain about their
financial choices should seek regular professional financial advice, to ensure they
secure the long-term retirement income they need."
Prudential's research has previously found that of those who took a lump sum from
their pension pot at retirement, a third (33 per cent) used all or part of it for
home improvements, 31 per cent paid for a holiday, and two in five (19 per cent)
bought a new car.
- ENDS -
- Retirement attitudes and pension lump sum research 2011 conducted online by
between 24 and 28 February 2011 among 1,001 UK retired adults.
- Pension funds lump sum research 2008 conducted online by YouGov between 2 and 6
among 4,051 UK adults, 1,003 of whom were retired.
'Prudential' is a trading name of The Prudential Assurance Company Limited, which
is registered in England and Wales. This name is also used by other companies within
the Prudential Group, which between them provide a range of financial products
including annuities, life assurance, bond investment, a tax calculator and
retirement plans, which include pension plan and pension annuity tips.
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