Research carried out recently by Scottish Widows shows that a significant number of retirees use pension lump sum payments to clear debts.

An estimated quarter of all retired people are using part of their pension lump sum to repay debt and a further 17% admitting they are using their pension lump sums that they receive when they stop working to pay off their mortgage.

Ian Naismith, head of their market development team said “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”.

Whilst his comments are true it seems to miss the point that if this is the process needed in order to clear debts, it will help someone to actually retire and enjoy their life if they do use their lump sum to clear debts.

A pension is a form of saving for old age but we now live within a world that is not as cut and dried as it was. We no longer aspire to working full time up to a specific date and then the next day being fully retired. More and more people will continue working, maybe on a part time basis, and look to stagger their retirement.

We are a society that has recently been built on debt; you leave full time education with debts and sadly, go into retirement with debt too. Because of this we have to start looking at pension arrangements in a different way. Maybe rather than feel sad or discourage the use of pensions to clear debts, we need to start thinking about them in a more flexible way.

If we started to think in a more progressive and flexible manner we might be more encouraged to save into a pension. We currently have the option to access money from our pension schemes from age 50, although sadly this is going to increase to age 55 in 2010. If we look at our pensions in a sensible way and use them more creatively, then maybe releasing some funds in stages can be a very useful option in some circumstances. It seems crazy to me that we are moving away from this flexibility by increasing the age you can do it. Do the government think we are not capable or mature enough to make our own decisions, or if we get professional help they are all going to stitch us up?

I’m not saying that we should all start looking at releasing some of the money in our pensions early but what I am saying is that we need to change our opinion about how pensions work and their purpose.

If we can start to look at them in a more flexible way, being creative and giving options about how and when we start to access them rather than being completely rigid and singled minded, then we may be able to start changing the culture of saving and encourage more and more younger people to start saving towards retirement.

Who wants to even think about saving long term for a fixed date a lifetime away, however, if you could think about a tax efficient savings plan that gave you flexible access from before you retire, maybe, just maybe, we could stop the rot and bad pres pensions get; and the first thing we need to do is change the attitude of the institutions such as Scottish Widows and bring their marketing into the modern world.

Just talking about saving enough “to make their retirement dreams and aspirations come true” is not going to encourage anyone – do they have an image of a woman in an apron next to an AGA? Please save me from this!