Two in five savers still not taking advice after pension freedoms

The pension freedoms brought more choice in how and when you can access your pension savings, and it's well worth talking through your options with a financial adviser.

Since the rules were changed in 2015, savers have been able to flexibly access their defined contribution pension from the age of 55. You can choose to withdraw some or all of your pension pot as a cash lump sum, use some or all of it to buy an annuity, or take an income from your pension pot while leaving the rest invested -- or a combination of these options.

There are lots of factors to take into account, but new research shows that many savers are still not taking advice on what to do with their retirement savings.

A YouGov survey commissioned by the Institute and Faculty of Actuaries (IFoA) found that when it comes to understanding and accessing pension savings, 40% of respondents took no advice or guidance at all.

More than 2,000 adults over the age of 55 were surveyed for the IFoA's report Freedom and Choice: Public attitudes - 7 years on.

Compared with a similar survey conducted soon after the pension freedoms first came in, the reforms are more clearly perceived as a 'good thing'. However, the majority of people struggle to understand how their pension is managed and invested. Only one in four (26%) respondents said they fully understood the charges for their defined contribution pension and 42% said they had no idea how their pension savings were being invested.

The survey also revealed that over one in five (22%) pension savers worry about running out of money in retirement.

"While pension freedoms offer individuals much more choice and flexibility, our survey shows that many are still not confident about decisions around their pension pot as they approach retirement," Leah Evans, chair of the IFoA's Pensions Board. "Worryingly, there is also a lack of understanding around how their pension is being managed and invested.

"As we discussed in our 2021 'Great Risk Transfer' report, individuals, particularly those with defined contribution pensions, are left to manage the risk of ensuring they have enough savings to fund them through retirement without knowing how long they will live. It's more important than ever that savers are prompted at every opportunity, by both government and industry, to take advice or guidance on their pension. This should help them get a better idea of whether they have enough saved to provide the lifestyle in retirement that they aspire to."

Men and women have different attitudes to taking financial advice about pension decisions, the IFoA found.

In the survey, 58% of men said they did not need to take guidance or advice compared with 43% of women. Of those who said they needed advice, men were 16 percentage points more likely to opt for tailored, regulated financial advice whereas women were 7 percentage points more likely to access generic guidance from the government's Pension Wise service.

"It is well known that, for a variety of reasons, there is a significant gap in the level of retirement income for men and women," Leah Evans added. "Our research shows that there needs to be greater focus on finding specific ways to target and encourage those who need it most to seek appropriate advice or tailored guidance on their pension."