Less than half of the UK's over-55s are taking financial advice before accessing their pension savings, research from the Institute and Faculty of Actuaries (IFoA) has uncovered.
After surveying more than 2,000 adults aged over 55, the researchers found that 40% had not taken advice or guidance to understand their pension savings and how best to access them.
Furthermore, only 22% had used the government's free Pension Wise service for advice, despite the same proportion saying that they worry about running out of money in retirement.
The findings come seven years after ‘freedom and choice’ reforms were introduced to allow people to access their pensions with greater flexibility.
Although these reforms are seen more favourably now than in 2016, only 26% of respondents said that they fully understood the charges for their defined contribution (DC) pension, and 42% said they had no idea how their pension savings were being invested.
“As we discussed in our 2021 ‘Great Risk Transfer’ report, individuals, particularly those with DC pensions, are left to manage the risk of ensuring they have enough savings to fund them through retirement without knowing how long they will live,” said Leah Evans, chair of the IFoA Pension Board.
“It’s more important than ever that savers are prompted at every opportunity, by both government and industry, to take advice or guidance on their pension. This should help them get a better idea of whether they have enough saved to provide the lifestyle in retirement that they aspire to.”
The latest survey, commissioned by the IFoA and carried out by YouGov, also found a gender imbalance. Looking at the findings for men, 58% said they did not need to take guidance or advice, compared to 43% of women.
Of those needing advice, men were 16 % more likely to take tailored regulated financial advice, whereas women were 7% more likely to access generic guidance from Pension Wise.
“It is well known that, for a variety of reasons, there is a significant gap in the level of retirement income for men and women,” Evans continued.
“Our research shows that there needs to be greater focus on finding specific ways to target and encourage those who need it most to seek appropriate advice or tailored guidance on their pension.”
Evans will appear in front of the government’s Work and Pensions Select Committee on Wednesday 23 March 2022 as part of its third stage inquiry into pension freedoms and saving for later life.
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Author: Chris Seekings