Will new pension freedoms lead to reckless spending?

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The majority of people approaching retirement has said they will take a cautious approach to spending following new pension freedoms introduced in April.

According to a new study by Investec Wealth and Investment, 81 per cent of people aged 55 to 64 who have saved regularly into a private pension plan to take a cautious approach to funding their retirement, despite fears the new rules will lead to reckless spending.

The changes introduced earlier this year allow those over 55 to take some or all of their pension pot of cash,

The study analysed attitudes among pre-retirees towards spending on non-essential luxuries when they finally give up work.

More than two-thirds (69 per cent) intend to spend their retirement funds on holidays and travel in the first ten years of their retirement, while more than a third (36 per cent) have earmarked home improvements. A similar percentage plan to eat out more, while just under a third (32 per cent) have budgeted for a new car.

Only 15 per cent of pre-retirees said they will spend more as a result of the new laws.

Nick Gartland, senior financial planning director at Investec Wealth and Investment, said: “Despite criticisms about pension freedoms encouraging irresponsible spending, this research shows this to be far from the case.

“The overall message is that the next generation of retirees is approaching retirement with caution, which is hardly surprising. “Improved life expectancy means that pension pots will in many cases need to finance 20 or 30 years of retirement and that’s before the added pressure of having to support their children and grandchildren with house deposits and school fees.”

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