Less than half of people understand what their retirement options are, new data from Hargreaves Lansdown has revealed.
A survey of 1,500 people found only 42% have a clear understanding of their retirement options, increasing slightly to 45% among over-55s.
Hargreaves Lansdown warned that the lack of knowledge leaves people at risk of making decisions they cannot reverse.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Deciding how to take an income in retirement will be one of the most important financial decisions that you will make and yet the data shows less than half of people understand their options.
“It means there’s a real risk of people sleepwalking into making bad decisions.”
Morrissey said decisions such as buying an annuity that is not right or drawing down too much income early in retirement could lead to people potentially running out of money or incurring large tax bills.
However, she said targeted support reforms, due to come into effect in April, will be helpful to those without access to a financial adviser.
“These will enable providers to really step up the support they can offer to their customers by being able to offer options based on what might work for “people like them.” Such reforms have the potential to be a real gamechanger for people navigating the complex retirement landscape,” Morrissey added.
Morrissey said people should give careful consideration to what level of guaranteed income they need to cover day-to-day expenses throughout retirement, whether they would benefit from the flexibility of income drawdown and what provisions they will need to make for family after they die, including whether they want to leave something to their children.
Morrissey said it’s also important to consider the impact of inflation over time and the risk of incurring large, unnecessary tax bills, for example by making a large withdrawal from income drawdown or cash in a pension.
Main image: mitch-harris-cPZ21gvclO8-unsplash
