Retirement plans crunched by debt

Retirement dreams of travelling are being scotched by debt, according to startling new research.

The Scottish Widows UK Pensions Report 2008 reveals Brits are increasingly aiming to retire into a life of enjoyment but many will struggle to afford to – being unable to save enough to meet income expectations or being battered by rising inflation.

A poll revealed travel is the most popular activity for the retired with 45 per cent of retirees travelling more.

Some 27 per cent take up a new hobby, and nine per cent start evening classes.

Some 30 per cent use retirement to turn to DIY and home improvement projects, and 46 per cent stick to stereotype and potter around the garden unsure of their identity without work.

However, retirement plans are also stymied by debt.

Some 17 per cent who received a tax-free lump sum from their pension arrangement used it to pay off a mortgage and 24 per cent used the lump sum to pay off other debts rather than spending it on enjoying their retirement.

Some 49 per cent of people are not saving enough to prepare for retirement so any dream of travel will be on ice.

Ian Naismith, head of pensions market development at Scottish Widows, said: "It is encouraging to see that so many people are enjoying themselves after they retire, but it is vital that people who are still working realise the difference between wanting a good retirement and actually planning for one. It's a shame that some people need to spend their hard earned savings on paying off a mortgage or clearing debts. Retirement should be about enjoying life.

"If people take action now to start saving enough, then they will be able to make their retirement dreams and aspirations come true, avoiding what can be the reality of having to struggle to get by in later years."