ONE IN FOUR Scots are expected to to come under pressure to dip into their pension savings to fund the cost of elderly relatives.
A report from the Scottish Widows think tank titled revealed that the new pension reforms, due to come into effect in April, will see around 27% of Scotland’s adults using their savings to fund care costs of elderly relatives or to invest on behalf of the wider family – e.g. in a property for children (17%).
The reforms will allow savers to take 25% of their pension in a tax-free lump sum and will benefit those who have built up relatively large pension pots as they will be able to avoid paying 40% tax when they draw it down under the new freedoms.
Almost one in four (24%) Scots believe the reforms will enable people to manage savings more effectively. However, they are outnumbered by the 43% who worry that the reforms could mean not having enough money for the whole of their retirement.
The report also finds that despite feeling the pressure to give up their retirement savings, 42% of Scots say they don’t know or haven’t thought about how they will survive financially in retirement. A further 14% intend to rely on State support, which could leave many financially exposed in later life.
Family support appears to be an integral part of financial management with parents increasingly looking to their children to plug the gap that loans and investments from an unlocked pension pot may leave in their retirement savings. Over a third (39%) of Scots feel that support from children in later life is repayment for what they have provided, and 41% also believe that children have an obligation to support their parents.
This support stretches to caring and living arrangements, with 40% of Scottish adults expecting to care for their parents and one in 20 (6%) expecting parents to live with them.
Carolyn Fairbairn, Chair, Centre for the Modern Family, said: “The reforms to the pension system announced in the 2014 Budget are transforming the retirement landscape.
“Although for many they will represent greater autonomy over how to use their savings in later life, it is important to consider the knock-on effects on families. Many may feel pressure to access their pots to support struggling family members in an already challenging economic environment.
“While it is reassuring that family members are seeing the importance of pulling together in this way, it is vital people are aware of all the short and long-term implications for retirement pots, and for policy makers and insurance companies to help people make an informed decision about how to best use their savings and manage their income in retirement.”
