Only one in 10 over-55s who has quit work since April 2015 admits to overspending. This is despite the introduction of the pension freedoms that give savers free access to their retirement savings once they turn 55.
Nearly four out of five (79%) who have taken lump sums out of their pension say they have spent their money wisely, with a quarter using the money to wipe out any outstanding debts.
Retirees have also been cautious about giving money to family members: only 16% gave their children money to help them buy property, compared to 8% that gave children or grandchildren money for their education.
Yet while there is little evidence to suggest that retirees are treating their pensions like piggy banks, almost a quarter (24%) say they have found it tough living on their available retirement income and 9% expressed concern that taking out a lump sum has given their income a long-term hit.
Vince Smith-Hughes, a retirement income expert at Prudential, says: “This research destroys the myth that people would generally be reckless with their retirement funds. Most people are being very sensible with their choices.
“Critics warned that there was nothing to stop people blowing all their retirement funds in one go but the opposite is happening, and the decision to trust people with their own money has proved the right one.
“The big challenge for people retiring is making sure that their money lasts the rest of their life, and it is encouraging that people are taking a responsible attitude to pension freedoms.
“However, retired people need a clear idea of how much money they will need and how long their retirement fund is likely to last. The best way for most people to do that is consult a financial adviser.”
How long your pension fund will last depends on its rate of growth and the amount of money that is withdrawn. Analysis from Prudential reveals that a 65- year-old with £150,000 pot, withdrawing £9,000 a year, can expect that money to last them until they reach the age of 101, so long as the fund continues to grow at a rate of 5% a year.
Should the same retiree take £13,000 a year – and only get growth of 1% a year – then the money will have run out by the time they are 78. With a 5% rate of growth, the money would last for a further five years, taking them to the age of 83.