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Retirement

Retirement spending to be more Mondeo than Lamborghini

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People in the near-retired segment of 55 to 64-year-olds are planning to spend a larger amount of their retirement pot in the immediate years after they retire, according to an Investec Wealth & Investment (IW&I) study.

Nearly three-fifths (59 per cent) believe they will reduce spending further into retirement when they are less willing and able to undertake activities such as overseas travel.
 
The research found that 70 per cent of those in the 55-64 age bracket plan to spend retirement funds on holidays and travel in the first ten years of their retirement. Nearly two-fifths (38 per cent) plan to spend money on home improvements compared to a third (35 per cent) who plan to eat out more and a quarter (26 per cent) on a new car.
 
However, the study by IW&I found there was little risk of retirees blowing funds on a new Lamborghini, with 82 per cent saying that people who have saved regularly in order to build up a pension pot over their lifetime are likely to take a cautious approach to spending in retirement. It also found that just 13 per cent of people aged 55-64 think that the changes to annuities announced in the March Budget will encourage them to spend more during the first few years of retirement.
 
Nick Gartland, senior financial planning director at Investec Wealth & Investment, says: “It is good to see that the majority of people are looking to take a sensible approach to retirement saving and spending given the profound changes announced in the March Budget.  If you save regularly throughout your working life you are unlikely to blow your savings in one go or too quickly, which is good to hear.
 
“Notwithstanding, there remains a need to be very careful how you invest and spend, given the changes and the new freedoms people now have: for instance, investment underperformance could become a greater issue if people are not locked into an annuity while tax issues and making ill-advised product purchases at the point of retirement could also become more serious.”
 
The research by Investec Wealth & Investment found that over half (52 per cent) of near-retirees are not planning to restrict how much they spend on non-essential luxuries in retirement in order to have sufficient funds to cover the cost of long-term care. In contrast, it did find that a quarter (25 per cent) expect to leave a larger inheritance for their family given the changes announced by the Chancellor in the Budget.
 
Gartland says: “The important things about retirement are to save as much as you can, and then enjoy yourself.  Saving prudently in the right assets and for the long-term remain fundamental to a successful retirement investment strategy.  People will actually have more not less choices going forward, so the need for professional advice has become even more crucial.”

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