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On the Buses

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People in the UK approaching retirement are spending more time buying a new car, or remodelling a bathroom, than deciding on how they use their pension savings, according to recent research by Legal & General.

Since 2015, the pension freedoms have meant that people reaching retirement age in defined contribution pension arrangements are able to use pension pots however they want, rather than having to buy a guaranteed annual income. Legal & General’s research “The Price of Freedom” has found that 32% of people aged over 55 are spending less than a week deciding how to use their pension income, whilst 40% of people in the same age bracket would spend longer than that when choosing a new car.

A problem with pensions is a general lack of understanding, and more needs to be done to better educate consumers in this regard. The fourth annual Pension Awareness Day recently took place, with a double decker bus being steered across the UK, in a bid to get everyone talking about pensions. It ended its journey in London on 15 September, Pension Awareness Day. In the absence of James May, Richard Hammond and Jeremy Clarkson, this was one British motoring Grand Tour that I was unaware of at the time, and I suspect I was not alone.

Commenting on pensions freedom back in 2015, the then Pensions Minister Steve Webb said he was relaxed about how people spent their pension savings. He went on to say “If people do get a Lamborghini and end up on a State Pension … that is their choice”.

If we can’t convince May, Hammond and Clarkson to drive the pensions awareness bus next year, then maybe we should be seeking to highlight the fact that unless the over 55s spend more time on how to use their pension savings, the choice of their next car is likely to be simple; it will not be a Lamborghini, and they may have to get used to buses!

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