Prudential UK has identified a trend among
retirees, which it calls the 'pensioner splurge'.
The life and
pensions company says this phenomenon is when pensioners
overspend in the first year of their retirement pension.
Almost half of the people in retirement that were polled by
Prudential said they struggled to adjust to living on their
retirement pension income in the first year after they
retired.
A quarter admitted to overspending in the first year of their
retirement
pension, with almost one in ten doing so by a significant
amount.
Of those who overspent in their first 12 months of their retirement
pension, half did so by between £1,000 and £5,000.
A further 15 per cent went more than £10,000 over the limit with
four per cent claiming they exceeded their budgets by £30,000 or
more. Two per cent admitted to splurging over £50,000 in this
period.
This overindulgence was funded by a
credit card in almost half of the cases, Prudential found.
Almost a fifth of those in retirement pension relied on a
personal loan, while seven per cent opted for
remortgaging property.
If a pensioner spends too much in the first year and does not
have enough aside for the rest of their retirement, they could be
left short later on, warns Trevor Mitchell, the head of
retirement income at the life and pensions company.
He says one way of avoiding this is to purchase an annuity, as it
gives lifelong income that can increase.
With-profits annuities are particularly attractive as they
can provide a regular income today, with the opportunity of
increasing income in the future, Mr Mitchell says.
