A quarter of retirees are in substantial debt in retirement and close to half of 50-75 year olds understand pensions or the options available to them, shows new research by Old Mutual Wealth and YouGov.
Findings from the fourth wave of Old Mutual Wealth’s Retirement Income Uncovered report*, takes an in-depth look at the retirement landscape post pension freedoms and finds that the UK’s non-advised population are at risk of making expensive mistakes because of a lack of understanding.
Two years on from the introduction of pension freedoms and close to half of the 50-75 year olds surveyed were either unaware of pension freedoms or do not know the impact of the reforms. This leads them to feel unsure of how to access pensions – with 40% of the 1,500 surveyed unsure of when and how to access the pot of money.
There remains a substantial advice gap with just 14% of the population speaking to a financial adviser. While there are hopes that Pension Wise would fill this knowledge gap, just 4% have used Pension Wise.
This lack of knowledge is fuelling insecurity amongst this age group about their future prosperity with 45% worried their pension will not last their retirement. With the OECD recently revealing UK pensioners are going to receive just 29% of their salary from the state in retirement, this research into personal pension provisions highlights that people are not sufficiently engaged to meet the shortfall.
Ian Browne, pensions expert at Old Mutual Wealth, says:
“We have a new retirement landscape, which means people’s finances are not as clear cut as they used to be. Pension freedoms have given people immense choice, but that means failure to make well-informed decisions means they could lose the opportunity to have a safe and secure retirement. Education and knowledge of personal finance is more important than ever.
“The government are taking a close look at the impact of pension freedoms through the Work and Pensions Committee inquiry. Next year we will receive a report detailing their findings and this offers the government an opportunity to increase the awareness and uptake of financial advice.
“Promisingly the currently pension minister, Guy Opperman, has put boosting engagement with pensions on his agenda. He is enthusiastic about the idea of a midlife MOT to assess an individual’s retirement provision at a stage in life when they have time to do something about it. A MOT could prove to be the crucial missing mechanism, one that would shepherded people towards the help they need.
“Government, regulators and the retirement industry have a responsibility to give consumers the products, support, guidance and advice to ensure that doesn’t happen.”
*Retirement Income Uncovered: Freedoms in Focus, was conducted by YouGov, who surveyed over 1,500 UK adults between the ages of 50 and 75.
Photo - Ian Browne, pensions expert at Old Mutual Wealth.