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Pension changes: 'quarter of a billion spent on cars and holidays'

Around 60,000 people have taken advantage of the government's new pensions system since April

More than a quarter of the one billion pounds withdrawn from pension pots under new government rules is likely to have been spent on holidays and cars, according to The Times.

Chancellor George Osborne announced this week that 60,000 people had taken advantage of the new system since it was introduced in April.

Over-55s now have the freedom to withdraw a tax-free lump sum from their pension pots; use their savings to purchase an annuity; or even withdraw their entire pension in cash subject to tax.

"More than £1bn has been transferred out of people's pension funds as a result," said Osborne. "It is a sign that this is a real success."

Research by Ipsos Mori suggests around ten per cent of this figure will have been spent on cars and nearly 20 per cent on holidays, equating to around £286m over two months, says The Times.

Another quarter of a billion has been "ploughed into the property market or home improvements", says the newspaper, while just a third of the money is likely to have been spent on day-to-day living expenses.

Some experts appeared to disagree with the Chancellor that the amount of money withdrawn since April was a logical way to judge the success of the scheme.

Adrian Walker, a retirement planning manager at Old Mutual Wealth, said: "I would suggest that a more appropriate measure of success will not come for many years, when those people who have withdrawn money from their pensions are still enjoying the retirement they planned and saved many years for."

Last year, Steve Webb, the Liberal Democrat pensions minister at the time, said he was relaxed about how people spent their pension pots. "If people do get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and that is their choice," he said.

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