Pensioners spend very little of their own total wealth in retirement, and will end up passing down most their wealth to family, research out today has shown.
A set of reports by the Institute for Fiscal Studies (IFS) found that older people in England were generally very well off, as 55-64 year olds held an average of £185,000 housing wealth and savings excluding pensions of £33,000.
But the IFS said this wealth, whether its held in housing or financial assets, is not often held in general draw down.
The study shows that pensioners are not recklessly spending their retirement wealth, as some critics feared they might when pension freedoms were brought in by the government.
Researchers found that financial wealth is on average drawn down slowly, as it said that people aged 70 to 91 only took out 31 per cent of their net financial wealth.
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Primary housing is the most common asset for pensioners, as 80 per cent of over 50s owned their home, with many not expecting to move out before they die.
It also found that family members who receive money will only get it later on in life. A 40 year old who was born to a 27 year old mother and an older father can expect to be given money when they are 63.
Rowena Crawford, an associate director at the IFS and author of the set of reports, said:
Older people do not draw on their wealth much during retirement. The majority of homeowners do not move or access their housing wealth, and even financial wealth is drawn down only slowly. This means that most wealth held by retired people is likely to be bequeathed to future generations, rather than spent.
Given the increased freedom people now have over how they spend their pension wealth in retirement, carefully monitoring how the use of wealth evolves in future will be important, both for the living standards of the retirees themselves, and also for younger generations.
Director of policy at Royal London Steve Webb said the report dealt a blow to critics of pension freedoms.
"This report confirms that the vast majority of pensioners who have saved through their working life are cautious with their money and leave unspent wealth at the end of their lives. This is great news
for those who believe in ‘pension freedoms’," he said.
"The IFS research suggests that the biggest concern about pension freedoms is likely to be about excessively cautious retirees spending too slowly than it is about reckless retirees blowing their pension savings on lavish living".