Thousands of pensioners risk spending retirement in poverty says Scottish Friendly

“We knew pension freedom would be popular, and while everyone will be relieved no Lamborghinis appear to have been purchased with pension proceeds, there is still cause to be concerned that the ABI statistics show so many relatively small pension funds are being cashed in.
“If people are not careful, hundreds, if not thousands, of pensioners could be left penniless and spending their retirement in poverty – or forced to continue working.
“The reason for this is there remains a misconception that if an individual cashes in their pension and proceeds to spend it in its entirety, they will at least be able to fall back on the safety net of a state pension. However this is not the case.
“The ‘Deprivation of Capital’ rule means that if you simply spend your retirement fund, give it away or lose all of your money and end up needing to rely on the state for support, you will only be allowed to do so if the Government agrees with your financial decisions.
“The Government is trying to protect the taxpayer from having to pay twice to support pensioners who misuse their pension pot, but it remains unclear how the DWP will identify what will and will not be accepted as depriving yourself of capital and it gives no guidance as to how people will be allowed to spend their pensions.
“The bigger concern is that people are unaware that they might find themselves destitute if they make a poor investment decision or are just naïve with their money. The Government needs to do more to protect these individuals and to educate them on the risks involved with taking full control of their pension funds”