Only a fifth of pension savers aged between 50 and 64 have spoken to a financial advisor about their pension, leaving many at risk of making “inadequate” preparation for retirement.
More than two thirds, at 69%, said they do not know how much money they need to save for retirement, according to a survey by The Social Market Foundation, sponsored by savings and retirement business Phoenix Group.
People aged from 50-64 are currently around £250,000 short of the amount of pension savings they need for retirement, according to the think tank’s analysis. Those surveyed expect to receive an income of £23,000 in retirement, which requires a pension pot of about £420,000, but they face a shortfall, on average, of £242,546. This adds up to a total annual savings gap of £132bn across the country for those reaching retirement age.
The introduction of pension freedom rules in 2015 opened up a much wider range of options for those retiring with defined benefit, or money purchase pensions. Although greater flexibility is welcome, it’s not always easy to decide on the right choice for you, and making a mistake could have a serious impact on your retirement income. Read more about your choices at retirement in our articles Your pension options at retirement.
Scott Corfe, research director at The Social Market Foundation, said there is a “serious” gap in the provision of pension guidance and advice for people approaching retirement.
He said: “The blunt truth about pensions is that many people don’t know enough to make the decisions that would give them the retirement they want. Poor information will mean poor outcomes for too many people.”
Find out more about how much you should be saving for retirement in our articles How much should I save for retirement? and Can you afford to retire?
Stronger push towards guidance and advice
Pension savers wanting to access their pension for the first time will be offered an appointment with guidance service Pension Wise, under new Government rules coming into force on 1 June.
The Pension Wise service provides people aged 50 and above with free guidance on their pension choices at retirement. You can book a free telephone or face to face appointment to get an understanding of your options, as a starting point towards planning your retirement. The service won’t recommend companies or tell you how to use your pension pot or invest your money.
Although Pension Wise has been around since 2015, recent research found a worrying lack of awareness that the service exists. Only 47% of those in the 50-64 age group who were asked had heard of the service.
The move to offer Pension Wise appointments is designed to encourage savers to ensure they understand their options before withdrawing money from their pension. At present, only around one in seven people with defined contribution pensions seek guidance before accessing their pension, according to government figures.
Guy Opperman, Pensions Minister, says: “We want guidance to be available to savers when making decisions about accessing their pension pots.
“These new measures support savers and further this government’s commitment to ensuring people across the country have the necessary support and information they need to make informed choices about their financial futures.”
If you want personal recommendations or advice about your specific circumstances, you’ll need to seek professional financial advice. You can find a local financial advisor on VouchedFor* or Unbiased*, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
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