New pension freedoms designed to give retirement savers control of their cash may not be as liberating as planned.
The government’s dream was to let people aged between 55 and 65 years old access their pension savings as they wished.
The intention was to ease their finances, so they could work fewer hours or even retire early.
But the reality is the rising cost of living and stagnating salaries has forced almost 2 million people to dip into their savings to pay debts and everyday bills.
Those 2 million people raiding their pensions represent around one in five aged between 55 and 65 that pension freedoms aimed to help.
More worrying, according to research by financial advice firm True Potential Investor, another 2.2 million in the same age group have taken on more debt on their credit cards and overdrafts or with new loans to pay their essential bills.
Instead of freeing up money with the freedoms introduced in April 2015, one in four are approaching retirement with an average £428 of extra debt.
The figures come from a survey of 32,000 workers who revealed all about their spending and savings.
A quarter voiced concerns about having enough money to pay their bills in retirement.
When offered a fantasy extra day each month to do as they wished, 14% said they would use the time to earn more money.
Savings not growing
Housing costs ate up the largest share of their incomes, with an average fifth of money coming in spent on rent or a mortgage.
True Potential Investor managing director David Harrison said: “The struggles many people may be having in the latter years of their working life serve as a warning to younger generations about the value of saving early for your future.”
“Although pensioners had some valuable protections, such as the triple lock inflation guarantee on state payments those on the cusp of retirement are clearly being squeezed.
“Inflation is higher than both wage growth and bank interest rates which leaves many over-55s with savings that are not growing.
“As no one can predict how their finances will look in the future, the earlier people start saving, the greater their ability to deal with whatever lies ahead and to fund a comfortable retirement.”