Six errors that put retirement savings at risk

PEOPLE in their sixties face one of the trickiest financial transitions of their lives.

- By HARVEY JONES

Moving from full-time work into retirement rarely happens overnight and, for many, it stretches out over years. That's when mistakes tend to creep in.

A mix of overconfidence, poor planning and easy access to pension savings means some risk damaging their long-term financial security just as life should be getting easier.

Marianna Hunt, personal finance specialist at Fidelity International, has warned that some of the biggest money mistakes happen at this stage.

"They include failing to plan, using up savings far too quickly, or not finding the most efficient way to turn retirement funds into an income stream."

Here are the six pitfalls Hunt has highlighted - and how to dodge them.

1. SPLURGING TAX-FREE CASH

Many people blow their pension tax-free cash the moment they get it.

After decades of hard work, that 25% tax-free lump sum can feel like a windfall, and pension freedom rules letting people access money from 55 (57 from 2028) add to the temptation.

Hunt points out that many spend quickly because the "tax-free" label encourages a sense of guilt-free consumption. Fidelity's research found only one-in-four savers plan to use that cash for retirement income.

Instead, they favour holidays, cars and home improvements, with a third of the cash going in six months.