More than a third (34%) of workers over 50 have not yet decided how they will access their pension savings as they approach retirement, leaving them at risk of a shortfall, warns Scottish Widows.
The firm’s latest Retirement Report found that while 46% of those still working expect to take their tax-free cash as soon as they can, in reality 64% did so, highlighting how priorities shift as retirement moves from a future plan to something more immediate.
Similarly, before retirement 27% of workers expect to keep most of their pension invested and take a regular income, while 20% plan to buy an annuity. However, 28% of retirees actually choose an annuity.
Carolyn Jones, retirement director at Scottish Widows, said: “Turning 55 opens the door to pension savings built up over a lifetime, but while access to that money brings opportunity, it also brings important decisions that can shape retirement for decades to come.
“That’s why we need to bring the conversation forward. Too many people only fully engage in their retirement planning when they approach the point of taking action. By then, valuable opportunities to plan, prepare and make informed choices may already have been missed.”
Scottish Widows’ research found that four in 10 (41%) over-50s who are still working have little or no understanding of the different ways they can access their pension savings in retirement. Only a quarter (25%) feel confident they know all the main options available to them.
The gap is even more pronounced among women. Nearly half (46%) of women over 50 who have not yet retired say they have little or no knowledge of their retirement options, compared with just over a third (35%) of men.
The retirement specialist said that while there is growing recognition of the value of advice, with 81% of over-50s agreeing it is important to seek support before accessing their pension, timing remains a challenge. Almost a fifth (19%) plan to seek advice only in the year they retire, leaving limited time to consider their options, while a further 15% do not know when they will seek help and 8% do not expect to seek advice or guidance at all.
Scottish Widows said technology can help to engage people with their pension earlier. More than two fifths (42%) of people say they would use AI tools to help explain complex pension terminology and translate industry jargon into plain English.
Jones added: “The industry is making progress. Targeted support, guided retirement journeys, digital advice and workplace education are all helping people navigate increasingly complex decisions. But we need to go further.
“Our rallying cry is simple – engage earlier, understand your options and seek advice sooner. And, as an industry, we have a shared responsibility to give every customer the knowledge and support they need. The earlier people think about their income needs, the more choices and confidence they have to achieve the lifestyle they want.”
Main image: mark-laurin-steffens-IVGZ6NsmyBI-unsplash
