More people saving for retirement but too many choosing non-advised drawdown, surveys find
8 April 2018
As the pension freedoms celebrate their third anniversary, new research has shown that people are saving more for their retirement, while the over 55s are working longer to fulfil their retirement plans.
Research by Prudential found that among those aged over 55, around 12% said they or their partner will work full- or part-time past their original planned retirement date.
More than one in 10 (11%) working over-55s said they have started to pay in to a pension for the first time, encouraged their partner to save more, increased pension contributions or restarted pension saving since the rules came into effect in April 2015.
One in seven (14%) said they are also making more of an effort to learn about retirement savings.
However, nearly two out of three (64%) of over-55s admitted feeling confused by the regulation and a large percentage (82%) want an end to any further government changes to pension rules. More than one in three (42%) expressed concern about running out of money during retirement, while 41% worry about funding long-term care.
According to Vince Smith-Hughes, a retirement income expert at Prudential, the reality of pension freedoms is “hitting home” as the realisation dawns among consumers that they are responsible for ensuring they have enough money to last throughout their retirement.
He said: “The fear that they might run out of money is forcing them to take a long, hard look at how much they should be saving to ensure they have the retirement they want. Pension Freedoms have in many cases shifted the responsibility for making a pension fund last throughout retirement directly onto consumers. Previously most people bought an annuity to guarantee an income for the rest of their lives. Now they can drawdown as much money as they like but the risk is that they run out of money in their lifetime.
“The fact that many over-55s are preparing to work longer and save more highlights that they recognise this risk and are responding in a rational and responsible way. The best thing most people can do to ensure a comfortable retirement is to take financial advice, while also trying to save as much as they can into a pension, especially a company-based scheme where they’ll immediately take advantage of contributions from their employer.”
But there are still too many people shopping around and trying to DIY their retirement, according to Retirement Advantage.
The pension specialist said 50% of people surveyed as part of their research had not received financial advice before dipping into their pension.
The most popular reason for choosing to go it alone was knowing what they were doing (59%), while the second most cited reason was using Pension Wise (17%).
A lack of trust for advisers was also a concern (14%), while a further 14% said they were put off by the cost of receiving advice. A much lower 6% said they wanted their money immediately, while 6% also turned to family for advice.
Andrew Tully, pensions technical director, Retirement Advantage, said: “‘Retirement can be a complicated business and the role that professional financial advice can play in helping people get the best possible outcome from their finances can’t be underplayed. The increase in sales of non-advised drawdown combined with the confidence of people who say they know what they are doing may come back to haunt us.”
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