Just under a quarter (23%) said they would draw it down over time, while one in six (16%) said they would take their pension as a lump sum. Just 6% plan to buy an annuity.
Since pension freedoms legislation came into force in April 2015, people with DC pensions aged over 55 have been able to actively choose how to use their savings. Before the legislation, pension savers were forced to purchase an annuity. However, they are now free to opt for drawing down over time, taking some of it as a lump sum, or purchasing an annuity, with the ability to take a tax-free withdrawal of 25%.
The survey of more than 2,500 defined contribution (DC) members found that those approaching retirement were more confident and engaged than other demographics. However, 30% of all pension savers confess they don’t know how to make retirement decisions and worry about how to access their pension savings. Being unsure was the most common response throughout the research, even for those claiming to be confident in making retirement decisions. Despite this, only 8% of pension savers said they use a financial adviser for help with their pension, while 6% have used Pension Wise.
Beyond making decisions, many showed concern about their savings; 37% of those approaching retirement lacked confidence in their savings lasting the entire duration of their retirement and 36% expressed worries that they will not have sufficient savings for a comfortable retirement.
To address the concerns of pension savers, TPT has been running an ongoing series of live pension planning and financial wellbeing webinars and producing a range of supporting materials to help employers engage their employees in their workplace pensions. As a result of this engagement, 43% of active members regularly review their pensions, up from 35% last year.
Philip Smith, DC Director at TPT Retirement Solutions, comments: “The lack of confidence and knowledge expressed by savers, particularly when approaching retirement age, is worrying. Similarly, the reluctance to pay for professional advice may result in high levels of anxiety and a lack of preparedness as savers approach retirement. DC pensions firmly put responsibility for members’ financial futures in their own hands. Helping people understand how workplace pensions work is therefore essential. If we want savers to take an active role in their retirement planning, it’s imperative that employers and trustees provide them with the right information, tools, and support to enable them to make informed decisions.
“Over the last few years, improving members' understanding of pensions has been one of our top priorities. We’ve introduced an extensive suite of support, initiatives, and educational tools, including an educational site for DC savers, personalised video annual benefit statements, a comprehensive new-joiner engagement programme, new pension savings tools and a series of live educational pension planning webinars.”
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