Pension reforms: Fears of luxury spending are unfounded - pensioners are considering all options, says PwC research

Published at 00:01 AM on 10 April 2015

Fears of luxury spending by pensioners able to access their pension pots for the first time this week appear to be unfounded, with just 1% of 50-75 year olds saying they will use the entirety of their pot to “treat themselves”, according to a PwC-commissioned poll of 1,200UK adults aged 50-75. Just over a quarter (27%) of those surveyed intend to spend some of their money on general expenditure, treating themselves or on home improvements, unsecured debt and mortgages.

Those approaching retirement are well aware of the need for their money to be used to fund an income, with 67% of respondents factoring certainty of income in to their retirement decisions.  Annuities, however, will not be the preferred option for those looking to do so, with only 28% of respondents planning to purchase one. 

Further key survey findings: 

  • 45% of consumers are looking to use their pension pot to draw an income by using a drawdown product
  • Tax efficiency is the second most important consideration for consumers when deciding how to use their pension pot, with 61% likely to factor it in
  • Less than half of respondents (45%) will consider likely investment risks during their retirement planning
  • 32% of respondents intend to invest some or all of their pension pot. Of these:
    • 39% of these would like to invest through online platforms and brokers
    • 17% want to buy an investment fund through an independent financial adviser
  • Of the 27% who intend to spend some of their pension pot:
    • 74% will use it for general expenditure
    • 70% will use a part of their pension pot to “treat themselves”
    • 22% intend to carry out home improvements or pay off unsecured debt and mortgages

Jonathan Howe, Insurance leader at PwC, commented: 

“At this early stage, drawdown products have clearly emerged as the preferred option for those looking to secure an income in retirement, but taking the money and investing is also being considered by many. The diversity and complexity of these new options means people are in danger of being caught out by unexpected costs. Despite extensive publicity, over a third of people are not currently considering tax efficiency, and over half are not considering investment risks, when deciding how to manage their pension pot. 

“This survey highlights that many customers are keen to take control of their retirement planning and be more proactively involved in investment and savings decisions.  With the right guidance, and affordable advice models, we could see a more engaged and financially literate population emerging as a consequence of these reforms. 

“Providers are in the very early days of both giving guidance to customers and developing new products they hope will engage this new market by meeting both their needs and wants. There is a huge opportunity for pension providers and insurers who respond to this rapidly changing, customer-centric, environment.” 

Raj Mody, PwC Head of Pensions Consulting, said: 

"It's clear from this survey that consumers are open to a range of options for how to use their retirement finances. However, savers should weigh up their options carefully before drawing down pension savings, and incurring tax on them, as they would not generally be able to return their funds to a tax-privileged shelter once they have taken their money out. Also, if further flexibilities for annuities already in payment are introduced next year, for some people it may be sensible to wait until they know their full set of options, if they can, rather than make short-term decisions now in a rush." 

Ends                                                                                    

Notes to editors 

  1. PwC surveyed over 1,200 people aged 50-75 between the 13th and 20th of March 2015.
  2. The survey results have been weighted to bring them in line with the distribution of the UK population, in terms of wealth and size of pension pot

Jonathan Howe is available for interviews. Please contact Ellie Raven on +44(0) 207 804 3663, +44 (0) 7525 925 830 or [email protected]

Ellie Raven, Media Relations, PwC

Tel: +44 (0) 207 804 3663

Email: [email protected]


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