Retirees Warned Against Placing Unnecessary Financial Pressures On Themselves

While consumers who have recently retired from work may be looking to take a step back from the pressures of modern living and enjoy the fruits of the labour, that does not mean they may not see their spending coming under constraints.

In research carried out by Prudential, it was revealed that just over three-quarters (76 per cent) of retired Britons with a private or company pension scheme are opting to make lump sums withdrawals from their retirement fund. Overall, it was reported that the typical retiree has taken 24,154 pounds out of their pension pot. The research comes, it was stated, despite there being much press coverage of late regarding the difference between the amount of money people believe they will need for a comfortable lifestyle in retirement and how much they have actually saved.

Of pensioners making withdrawals, 13 per cent have given funds to their children. Findings from the financial services firm also indicated that just under a fifth (18 per cent) use the money to buy a holiday, while 14 per cent simply wish to treat themselves to something that they have always wished for. Meanwhile, 31 per cent have used the lump sum in order to fund improvements to their home.

For Britons looking for an effective way in which to finance renovation work to a property, taking out a home improvement loan may also be recommended.

However, those consumers who are particularly keen on withdrawing cash from their pension pots could find that they struggle with their money management later on in life. In turn, this could have an impact on their capacity to keep track of other areas of financial constraint. This may incorporate areas such as loan repayments, credit cards and property repairs.

Gary Shaughnessy, managing director of retail life and pensions for Prudential, said: “Before giving away money from their pension at the point they retire, people should think about the repercussions. While they may feel at their most financially secure, they should think about how long they will live in retirement and how long their pension pot has to sustain them. They should also consider the effects of inflation, increasing living costs and the potential cost of care. Even in retirement, people have to plan for the longer-term or they run the risk of their finances becoming increasingly strained.”

Mr Shaughnessy went on to advise that before withdrawing major lump sums of money from their pension pot during the early stages of their retirement consumers should “think very carefully”. He added that consumers should first consider numerous other financial moves.

For consumers looking for an effective way to supplement their finances, taking out a low cost loan could be recommended. By doing so, it is possible for borrowers to achieve various financial aims, whether it is buying a car, giving monetary assistance to a relative or funding home improvements.

A loan could also help those looking to reduce pressures on their spending. In a recent study by MoneyExpert it was revealed that some 33.2 million suppliers of household services were changed during the first three months of 2008 in a bid to secure a cheaper deal. It was also revealed that 46 per cent of Britons have changed at least one financial product over the past six months.

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