Pension Pot Raiders Fail To Plan For Future

More than half of those who have raided their retirement savings under pension freedoms have no plan for how to pay for their future care, according to new figures.

A survey by Citizens Advice found just 16% had budgeted for care costs as they grow older while 60% had no plan and a further 23% had given some thought to meeting these expenses - for example by remortgaging or selling their homes.

One in 10 of those who had no plan said they would rely on others such as family or the Government, according to the poll of 500 people who have accessed their pensions since the freedoms were introduced in April last year.

The charity said currently four million older people had care needs including home help or moving into residential or nursing accommodation.

It acknowledged difficulties facing people as they prepare for the future due to uncertainties over their income, health, life expectancy and changes to Government policy or the care market.

Citizens Advice called for local authorities to help make future costs clearer for people, possibly by referring them to online and face-to-face services when taking money out of pensions savings.

Chief (Taiwan OTC: 3345.TWO - news) executive Gillian Guy said: "Care costs can be a heavy financial burden that many people are unprepared for. It is unsurprising that many people in their fifties are not thinking about how they will pay for care costs when the need for this could be 10, 20 or even 30 years away.

"But this issue does need some attention, otherwise people risk dipping into their pension now only to find they need some of the money later.

"Getting the right guidance is key in helping people think about and plan how they will fund their retirement - including costs which are more tricky to consider, such as care fees."

A Treasury spokesman said: "Our pension freedoms are proving to be a great success.

"To help people make informed decisions, including on the costs of care in retirement, the Government set up the free and impartial Pension Wise guidance service which over 2.8 million people have accessed since April 2015."

But Debbie Abrahams, shadow work and pensions secretary, said complacency by the Government could lead to a pensions crisis "when people who have taken too much out of their pension pot, or have been subjected to multiple hidden charges, find themselves short of money".

Official figures in April showed that 232,000 people had used the new freedoms to access £4.3bn from their pension pots, in the first year of the reforms (Other OTC: UBGXF - news) .