Sometime soon many new retirees will be sitting in their counting houses counting out the money they’ve cashed in from their pension pots.
The government has made it possible for them to do that and the idea of having a six-figure sum or thereabouts which normally would have gone into an annuity but which will be available to spend as they please will be novel.
Will they splash it all on a three-month world cruise, renovations to the home and a new car? Or will they reinvest, hoping to double their money?
Unfortunately, if research is to be believed, they might not be able to hold on to it or spend it as they wish because nearly one in three of those newly enriched in this way will be having to swat off the relatives who think they’re entitled to what they will regard as their share.
Research conducted for The Centre for the Modern Family reveals that 30 per cent of people aged 55 and over predict relatives will try to make them ‘feel obliged to lend them money’. Can you just imagine the scenario over the Sunday lunch a newly enriched retiree is invited to by her children?
I doubt if they’ll be so brass-necked as to ask outright for a lump sum. But you can bet there will be a discussion on how hard it is to fund the grandchildren’s university education, and how difficult it’s going to be for those same children to get on the housing ladder, to be followed by a question: ‘How’s the retirement funding going mum’ ? - or dad. Whoever it is they believe to be suddenly rolling in money.
Maybe they’ll couch it in such a way that makes it seem like a loan they will be willing to pay back. Those very same children, of course, will, if they’re working, have their own pension pots but won’t entertain the notion that they should dip into them for the benefit of their own children. They’ll probably be able to afford a sunshine holiday each year and update the car but still they will feel that grandparents should pitch in to pay for the younger generation’s education and that first home. Not that they will say it outright, of course. But they’ll become adept at dropping hints and crying poverty when the opportunity arises.
The idea of having to wait until parents have died before inheriting whatever money may be left behind doesn’t occur to this generation of parents. They’re used to getting what they want, when they want, so why should they have to wait?
Their sense of entitlement is unattractive, even dangerous, since it could leave grandparents short of money for their own care if that pension pot they’ve built up over a working life is eaten up by the younger generation.
Age UK worries that many of them could run out of money by the time they’re 75. That ‘loan’ may not get paid back as promised and it’s perfectly possible the invitations to visit the grandchildren and the Sunday lunches will dry up now that granny/grandpa have served their purpose and have nothing left to give.
It’s time then for those retiring soon and who can benefit from the pension freedoms to harden up and educate themselves about how much they are likely to need to see them through what could be another 40 years because they can be reasonably certain that those children they bailed out all those years ago will have spent the money, not necessarily on the causes they borrowed it for, and will find them a burden.
We have a government at Westminister which thinks the current baby boomers have had it too good and should help the next generation (I’m fairly certain that is the thinking behind the new pension reforms).
Those coming up to retirement should think long and hard about their own needs. Do they really want to see their hard-saved money squandered on the latest laptops and the kind of lifestyle their children think they deserve but haven’t earned themselves?