Pensioners refrain from splashing the cash despite retirement rule change

Fewer than one in 10 (nine per cent) new pensioners overspent or think they will overspend in their first year of retirement, research out today has found.

When polled on behalf of Prudential, just one in five (22 per cent) first year retirees planned on purchasing a luxury holiday and only 16 per cent intended to splash out on a new car. On the other hand, over a third (34 per cent) said they would make no extravagant purchases at all.

The survey also found 44 per cent of retirees wanted to enjoy their money after working hard, while 36 per cent were more concerned about their retirement income lasting.

The research could help to dampen fears that greater pension freedoms would lead to retirees blowing their cash on expensive purchases.

Vince Smith-Hughes, a retirement income expert at Prudential, said: "It would appear that many post-pension freedoms retirees have heeded the warnings about potentially running out of money later in life and are forgoing extravagant purchases when they first retire."

However, the research brought to light some less positive signs as well. Just one in three (33 per cent) new pensioners said they had set a budget for their first year of retirement, while 13 per cent confessed they had found living on their retirement income harder than they expected.

The report also showed over two thirds (68 per cent) took a lump sum of cash from their pension pots in the first year of retirement without taking professional financial advice before doing so, which could put their future income at risk.

Among those who had taken and spent a cash lump sum from their pension savings, a third (39 per cent) felt that they had spent it wisely while a further 19 per cent said they’d enjoyed spending the money.