• Two thirds (63%) don’t understand the key features of a pension
• Three quarters of people (77%) don’t understand new pension freedom reforms, with 68% of those nearing retirement (over 55s) unsure about their options
• Plus, more than half (58%) don’t know how much to set aside for a comfortable life in retirement
The research conducted by the specialist financial mutual revealed how much confusion there still is among most people when it comes to their retirement planning. Three quarters of people (77%) don’t understand the pension freedom reforms put in place last spring, with 68% of those nearing retirement (over 55s) being unsure.
Overall, one in eight (12%) people incorrectly believe the reforms mean you can withdraw your full pension fund at any time, completely tax free. While one in seven (15%) believe you can only take a sum of your defined contribution pension once you retire.
The research also showed people expect to need an average of £22,596 a year in retirement – almost a third more than the actual average UK pension income*, leaving a potentially very large funding gap for the average retiree.
As the government introduces the Lifetime ISA to encourage saving for retirement, it is clear many people still do not understand how much to save each month for the future, with more than half (58%) saying they don’t know how much they should be putting into a pension pot.
Vicki Wentworth, Chief Customer and Strategy Officer at Wesleyan, said: “Our research shows how important it is for people to get proper advice to ensure they reach their retirement goals.
“How much people need in retirement depends on their own circumstances and needs, but what is clear is that many people have an idea of what they would like to have in retirement, but aren’t planning early or effectively enough to achieve it.
“Given the amount of publicity that has surrounded the major pension reforms introduced last year, we would expect to see people begin to plan earlier for retirement, although our insight tells us that doesn’t seem to be happening yet. While the regulation may have intended to make planning for retirement simpler and more flexible, in reality it appears people are still confused.
According to the research, four-out-of-ten (44%) haven’t done any research about pensions in the past year, despite all the changes, while more than a third have no intention of researching their retirement plans in the next 12 months either, suggesting those in the dark will remain confused about what lies ahead.
The over-55s did have a better understanding of how to identify a pension scheme with almost half (45 per cent) correctly identifying the key features – compared with 30 per cent of 25-34 year olds.
The research also found three quarters (73%) of people are unaware they could get upwards of 25p from the government for every pound invested in a pension
Vicki added: “For people to enjoy the standard of living they dream of in retirement, it’s imperative they not only plan their finances now so that they can afford it, but continuously review those plans.
“If what we are hearing is true, that many people have not started, nor do they intend to start, any research around what the pension reforms mean for them, then there is clearly a real and apparent need for knowledgeable, credible, expert advice.”
Wesleyan, which specialises in providing specialist financial advice and services to doctors, dentists, lawyers and teachers, surveyed 1,000 people across the UK about their knowledge of pensions, retirement planning and the new regulations brought in last year.
• Research based on a survey of 1015 general consumers, by Censuswide on behalf of Wesleyan, February 2016
* Prudential Pension Research – Jan 2015
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