hYPERBOLIC DISCOUNTING

‘Preference for a smaller reward sooner than a larger reward later’

‘I want it all and I want it now’ sang Queen and today’s retirees can do just that. All of their pension fund can be cashed in and, according to the then Pensions Minister Steve Webb, used to buy a Lamborghini (if that’s what they want to do).

Around 500,000 people have cashed in their pension pot since the new pension freedoms, and about half of these have spent the money (though some have used it to repay debts).

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It’s essential to point out the risks of taking too much cash:

  • Do they have other sources of income in retirement?
  • Remind them of the longevity statistics – retirement can last a long time these days.
  • Stress the tax implications if they take more than the tax free limit (use our tax calculator).