Spending under new pension freedoms 'likeliest on home improvements'

18% put their money towards a one-off purchase

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People spending their cash under the new pension freedoms are most likely to use the money towards home improvements, research has found.

The Pensions and Lifetime Savings Association found that of those spending all or some of their cash under the freedoms introduced last April, one in three (32%) splashed out on home improvements.

A further 18% of those who had spent some or all of their money put it towards a one-off purchase, while 14% paid off a loan or a credit card and 12% paid off their mortgage. Meanwhile, 3% spent the money on their family.

The freedoms mean that people aged 55 and over are no longer required to buy a regular income called an annuity when they retire. Instead, they can take the cash how they wish, subject to tax.

Asked how they had used their pension cash, 57% of people using the freedoms had saved some and spent some, 19% had saved or invested it all, 18% had spent it all and 6% had done some other combination, such as donating it.

The research also found that despite property often being considered as a popular investment for people approaching retirement, this was cited as the choice of investment for only 8% of people saving or investing their cash withdrawals.

Joanne Segars, chief executive of the Pensions and Lifetime Savings Association, said: "The message that comes through loud and clear from our research is that there's no more normal when it comes to deciding what to do with savings at retirement.

"Pension freedoms have destroyed the traditional norms leaving a blank canvas for millions of people.

"This first cohort of savers are effectively pension pioneers - working out how to make the right decision with their savings but at the same time naturally fearful of making a poor decision in uncharted territory."

More than 3,000 adults aged between 55 and 70 took part in the research.

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