The UK population typically underestimate its lifespan, is generally resistant to taking financial advice and expects the government to provide a safety net when their retirement savings run out, a wide-ranging report has revealed.
Employee benefits consultants JLT surveyed 2,000 UK adults and, separately, 250 employers, to assess the impact of the recent UK pension reforms. It also issued a wider investigation of international pension systems, with a particular focus on the Australian model.
JLT chief executive Mark Wood said: 'There is clear evidence that individuals need more support and guidance around their retirement planning and education has to play a key part in helping the industry tackle this challenging issue. Whether this is provided via the state, the pension provider, the employer or all three, remains to be decided.
'Our research shows there is an inherent reluctance to consult an adviser, which we believe is due to a fragmented British pensions market and the perception that paying for financial advice is only worthwhile if you are a high-net-worth individual.'
The survey of ordinary people showed that over half of the respondents are worried about financial security, with over 55% underestimating their longevity and nearly 40% saying if they took a lump sum on retirement, they would reinvest it in either a long-term or easy access bank account, which currently yield negative real interest rates.
It also revealed that 16% of respondents didn't know what an annuity was. This represents many challenges in terms of financial education and the 'guidance guarantee', JLT said. This was further compounded by 60% of people who are indifferent to - or actively resist - financial advice.
It also found that 72% plan on falling back on the state if their savings are inadequate, with 400,000 retiring from DC schemes yearly, this will quickly become a drain on the UK government, JLT said.
The survey of employers showed that more than three-quarters (79%) support the government's pension reforms. A quarter of employers said they would amend their pension scheme's rules to allow flexible retirement and a quarter said they would not.
A sizeable majority (69%) of employers said the provision of financial advice should be outsourced to ensure impartiality. Almost two-thirds of employers (63%) think that the cost of additional support and advice should be borne by employers, although 35% only agreed under the condition that the cost is subject to tax relief.
Meanwhile, JLT argued that the Australian pension model, which has been cited by the chancellor as a success, was flawed. Its study revealed that 80% of Australian pensioners rely to some extent on the state to provide retirement incomes.
Means-tested state pension against assets and income drawn, combined with the absence of tax on drawdown after age 60 created an incentive for pensioners with smaller funds (£100,000 or less) to spend their entire savings very quickly as they would then qualify for state pension. In addition, income from annuities in Australia used to be exempt from tax, but the relief was removed gradually in 2004, which saw the market disappear. Also, longevity risks were overlooked by Australia-based advisers, JLT said.