14pc of retirees would repay borrowing with pension

The Chancellor announced in the 2014 Budget that people will be able to withdraw their entire pension pot in cash.

Of 2,006 people interviewed between 45 and 70 in April 14% would use the money to repay secured borrowing such as a mortgage while a further 13% would repay other unsecured borrowing such as loans or credit cards.

Others would sink the money into property, or other income generating assets, with 23% favouring that option.

Most favoured keeping their money secure, as 43% would look for a savings bond or a similar product, while 36% would simply put it in the bank.

Andrew Megson, managing director of retirement, Partnership, said: “This research clearly highlights that having saved during their working life, most people are keen to keep the money safe or use it to reduce their liabilities.

“However, in an attempt to carefully manage what is essentially their income for the rest of their lives, 36% of people would simply put it into a bank account.

“With inflation at 2.7%, most instant access savings accounts are unlikely to be able to offer rates which meet or exceed this. Therefore, this careful management of their pension fund may actually mean that it is eroded overtime.”

Some would use the money to have a good time, as 14% said they would treat themselves to a holiday, car or another luxury.

Megson added: “While we are convinced that enhanced annuities can – and should – play a role in many people’s retirement finances, we understand that with recent proposed legislative changes, those approaching retirement imminently need time to fully consider their options. We are therefore delighted to have launched our enhanced choice annuity.

“This product is a lifetime annuity with a 1-year cash-in option which not only provides people with time to consider their options – post budget –but also protects them against interest rates falls.”