At the 2014 Spring Budget the Government announced fundamental reforms to the UK Defined Contribution (DC) pension system to allow pensioners to access their retirement savings more flexibly. Ten years on, new research from Standard Life, part of Phoenix Group, highlights that while those approaching or in retirement are supportive of being able to choose how they access their pension, many do not feel confident about their options and the corresponding rules.
Only 6% of over 55s say they don’t like having the choice to access their pension in the way they’d like – almost half (49%) say the like the choice. However, among over 55s who have heard of Pension Freedoms, a quarter (24%) feel unsure about whether they know and understand the different options and rules around accessing their pension funds, and 13% admit they do not feel confident about this.
The research demonstrates that people need more information and support to help them make their retirement choices, as 15% of over 55s say they feel overwhelmed at the options for accessing their pension. Worryingly, 16% admit they didn’t understand the rules around accessing their funds before they did so, while 7% have delayed taking from their pension because they didn’t understand their options.
While Pension Freedoms have given people flexibility and choice, it’s also given them responsibility over managing their retirement savings – and 15% are worried that since they have drawn from their pension they don’t have enough to live comfortably. A further 7% also say it's been difficult to manage their pension.
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group commented: “Pension Freedoms opened up the retirement futures of millions of DC pension savers, giving more choice and flexibility around how they could access their savings, and overall those approaching or in retirement have been supportive of this. However, with greater freedom came greater individual responsibility, and it’s clear that a number of over 55s have found this overwhelming and the options confusing. As such, more needs to be done to ensure people feel confident they can make decisions about taking money from their pension.
The fact that retirement saving is often not seen as an immediate priority and there’s a perception that pensions can be quite complex has led to people lacking education around and engagement with their pension. As things stand, many also reach retirement with less in their pension than they’d expected, making the decision on how to access limited savings even more vital, and difficult. Improving access to affordable financial advice is key to improving people’s confidence and chance of securing good retirement outcomes, and we welcome the FCA’s current consultation into the advice guidance boundary. In the meantime, many pension providers give guidance and tools to support decision making at and on the approach to retirement.”
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