One of the many decisions someone lucky enough to have an occupational pension and contemplating retirement or at least approaching the magical age of 55 has to make is what to do with their pension pot. Since April last year the requirement to convert it into an annuity was abolished leaving pretirees free to do with their accumulated loot what they will. The fly in the ointment is that only 25% of your cash is available tax-free, as before.
Predictions that old codgers would go on a wild spending spree seem somewhat ill-founded, if figures released by the Association of British Insurers are to be believed. They report in the first year of the so-called pension freedom £5.9 billion was withdrawn from pension funds, some £3 billion in cash lump payments to 213,000 over 55s and £2.9 billion in the form of regular sums to provide an income. The average amount paid out as a lump sum was £14,800, hardly enough to fund a lavish lifestyle but enough, perhaps, to pay off mortgages, tart up the home or go off somewhere exotic.
I took around 20% from two of my larger pension pots, electing to retain annuity payments, albeit scaled down. Rather like Harry Enfield’s loathsome creation, Loadsamoney, there is something comforting in having a wad of cash. The irony, though, is that because of serious health issues experienced by one of our close elder relatives TOWT and I are likely to do far less travelling in the near future than we had hoped and some of the plans that I had been working on have had to be put on ice. Still, the new-found wealth has ensured a plentiful supply of high quality Class A drugs (joke).
Talking to a number of my friends and colleagues who have taken the plunge to retire, there seems to be a high correlation between health issues suffered by them or their loved ones which have buggered carefully laid plans and the early months of retirement. Is it a warning against early retirement or is it just an age thing, which seems unnaturally unfair when you should be doing what you want and living a carefree existence? Something to ponder on, for sure.
I have always been a pessimist at heart. There is something consoling, I find, in never being disappointed by whatever life throws at you. Many pooh-pooh the pessimist and laud the happy-clappy optimist but it may just be I have always been on the right track, if some research recently conducted by scientists from the University College of London is anything to go by.
45 students were invited to play a computer game where they had to turn rocks over and if they discovered a snake lurking underneath they (the students) received a mild electric shock. Their stress levels were measured though pupil dilation and sweating. The highest level of stress was exhibited when there was a 50/50 chance of a snake being found under a rock and the lowest when there was a zero percent or 100 per cent chance of receiving a shock.
The conclusion drawn from this stunning experiment is that uncertainty leaves people anxious and feeling unable to cope whereas a calm acceptance of the inevitable leads to a stress-free existence. So I shall continue to look on the dark side of life and, perhaps, even draw out the rest of my loot from my pension pots. You know what is round the corner!