A recent report has found that millions of older people in retirement are having to use their tax-free lump sum pensions, to pay for their outstanding mortgages and personal debts.

According to research from the pension provider, Scottish Widow, almost 40 per cent of pensioners, use their finances for such reasons; with 17 per cent using the money to pay for their mortgage repayments, while 24 per cent were found to use their pension funds to pay off loans and other debts.

Ian Naismith, head of the firm's pensions market development, said: "It's a shame some people need to spend their hard-earned savings on paying off a mortgage or clearing debts. Retirement should be about enjoying life. It's vital that people who are still working realise the difference between wanting a good retirement and actually planning for one."

He added: "While pensions savings are slowly starting to rise, there is still the real worry that in the current economic environment the nation is not doing enough to prepare for retirement. While people are scared that they will not have enough to live on in retirement, this hasn't necessarily translated into pensions savings. The best investments for those seeking security in retirement are pensions."