The pension freedoms launched last month mean that those approaching retirement have more choice than ever when it comes to securing an income from their pension, but they've also made the decision more complex. That's why seeking advice is more important than ever, but unfortunately, it seems that not everyone realises that fact.
Research from wealth planners Sanlam has revealed that just 20% of over-55s surveyed will take advantage of Pension Wise, the Government's free retirement guidance service, despite it being one of the key ways to get a thorough grounding in the new options. Instead, 37% will conduct their own online and telephone research – something that should ideally be done in addition to consulting Pension Wise – while 17% will seek advice from their families.
Many of those with a go-it-alone mentality still plan to take advantage of the reforms, with 49% of those surveyed supporting the freedom to take their pension as cash, with just 19% being against the new legislation. However, a third (32%) are still undecided on whether the reforms will be beneficial, and nearly one in three (29%) said they didn't know if they would withdraw their pension to manage the money themselves, keep the money invested or buy an annuity.
This suggests that over-55s need more time and guidance in order to understand the new options available, which means many should be actively seeking advice rather than turning away from it. The reluctance to seek support is even more worrying given that 34% admit they're on course to exhaust their savings during retirement, which would potentially leave a large number of retirees wholly reliant on the state.
"The confusion and uncertainty displayed by consumers impacted by the pension reforms exposes the risk that many over-55s could begin making significant changes to their lifetime savings without any form of professional advice or guidance," said Alex Morley of Sanlam Wealth Planning.
"As the cost of living goes up and people are living longer, we could end up with a large amount of people exhausting their private pensions and having to rely on the Government to support them in their later years. Much more needs to be done to demonstrate to consumers the impact of the new pension legislation and the benefits of seeking advice before making any big financial decisions."
The importance of seeking suitable advice can never be underestimated, particularly if you think you could outlive your savings if you went it alone. Those with this concern may like to consider annuities to guarantee an income for life, but there are several other options to consider. The key thing is to make sure you seek the right guidance, giving you the best possible chance of securing the retirement income you want.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.