Pensioners regret taking tax-free lump sum

Sunday 17 July 2011 00:00
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The ability to take a tax-free lump sum at retirement is supposed to be one of the major benefits of having a personal pension.

However, research from pension provider Prudential has shown that one in 10 savers who took a lump sum at retirement later regretted they had done so.

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. But, some pensioners are beginning to regret the way they used the tax-free cash.

"The days of buying a new car or going on a once-in-a-lifetime holiday may be gone, to be replaced by making savings and investments with the lump sum to supplement retirement income," said Vince Smith Hughes, the head of business development at Prudential.

Overall, 43 per cent of pensioners quizzed by Prudential said that they were living in a financially "cautious" way in retirement, worried that their savings pot will not see them through to the end of their lives.

Prudential's research also found that of those who took a lump sum at retirement, a third (33 per cent) used all or part of it for home improvements, 31 per cent paid for a holiday, and 19 per cent bought a new car.

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