Retired Brits to take holiday from pensions

The top priority of Britons retiring in the next five years is heading off on holiday - but experts question whether this is an appropriate use of their pension fund.

On retirement, investors are allowed to withdraw up to 25 per cent of their pension fund as a tax-free lump sum.

Fifty-one per cent of Britons retiring in the next five years plan to use their maximum tax-free lump sum when they finish work.

And one person in four plans to use this on a holiday, GE Life’s State of Retirement Report shows.

This is despite more than a third of retirees believing they have only made "limited" provision for their life after work, and the majority saying they wish they had started investing money in their pension earlier.

"The reality is that the golden days of retirement are far from a realistic prospect for the majority, and retirement really won’t be a holiday unless people take action now," said GE Life chief executive Scott Dolfi.

"Obviously people will want to celebrate the start of their retirement, but it’s important to think about the long-term.

"With people living longer people need to think even more about how they will cope financially with retirement - spending on holidays may not be advisable if you will struggle on a day to day basis, which statistics indicate could be the case."

Most popular uses for the tax-free lump sum
1 - Go on holiday - 24 per cent
2 - Put the cash in a savings account - 17 per cent
3 - Buy a property - 11 per cent
4 - Buy a car/caravan/motor home - eight per cent XXX