Pensioners splash out £186mn on holidays

Almost 20% of spending from savers cashing in their pension pots will have gone on holidays.

This is equivalent to £186 million spent since April, according to an analysis of the first official figures since new rules relaxing access to pension funds for over-55s were introduced, The Times reported.

Research by the investment service Hargreaves Lansdown on the spending intentions of people accessing their savings suggests that 10% of the cash will have been spent on cars, equivalent to £50 million a month, based on the official figures.

A further £176 million will have been spent on home improvements. An estimated £100 million released since the reforms will have been ploughed into the housing market, according to Hargreaves Lansdown,

However, only a third of the money will have been used for day-to-day living expenses, the original intention of a pension.

Chancellor George Osborne said that 60,000 people had taken advantage of his pensions revolution since April.

“More than £1 billion has been transferred out of people’s pension funds as a result,” he said. “It is a sign that this is a real success.”

However, Osborne acknowledged that many people had been thwarted in trying to access their savings because pension providers are failing to offer the full range of options.

Tom McPhail, head of pension research at Hargreaves Lansdown, said that 60,000 people moving to cash in on their pensions was “not more than you might expect in a normal two-month period” before the rules changed.

He told the newspaper: “This could be because of teething problems with the big insurers. But while the numbers have not changed significantly, what people are doing with their cash has, with less than one in ten choosing to buy an annuity, compared with eight or nine in ten only a couple of years ago.”

The new rules allow anyone older than 55 to withdraw their entire pension pot in cash, subject to tax; convert it into an income for life, known as an annuity; or leave their funds invested but take cash out when they need it, known as income drawdown.

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