Report suggests Retirees reluctant to spend pension wealth
New research has revealed that older people are less likely to spend money impulsively.
According to a survey from the Institute for Fiscal Studies which explored how retirees are spending their wealth post-retirement, many are not drawing down as much as they could.
The results showed that on average, individuals between the ages of 70 and 90 will draw down just under a third (31%) of their net financial wealth.
The spending reluctance seemed to apply to those with higher levels of financial wealth too, with the results showing that even among those in the top half of distribution, the net financial wealth drawn down on average was 39%.
Warning of the potential implications of the cautious spending among retirees, the IFS suggested that the way in which wealth is passed on could have negative repercussions for distribution of wealth. This is particularly the case for working-age individuals who have few siblings and wealthy parents, with the inheritance of wealth affecting the level and supply of resources amongst this demographic.
As highlighted by the IFS associate director Rowena Crawford, the freedom people now have over their pension wealth will need to be closely monitored.
Also commenting on the findings was Steve Webb. The policy director at Royal London said: “This report confirms that the vast majority of pensioners who have saved through their working life are cautious with their money and leave unspent wealth at the end of their lives.
“This is great news for those who believe in pension freedoms. The IFS research suggests that the biggest concern about pension freedoms is likely to be about excessively cautious retirees spending too slowly than it is about reckless retirees blowing their pension savings on lavish living.”