Retirees shun Pension Wise service despite inadequate savings

Despite the ability to access free guidance via the government’s Pension Wise Service, more than a third (37%) of people said they would conduct their own online and telephone research and 17% said they would seek advice from their families. The research surveyed 2,000 people over the age of 55 from across the UK.

The reluctance to embrace Pension Wise is at odds with how over 55s feel overall about the pension reforms. When asked if they support the changes allowing more freedom to take their pension as cash, nearly half (49%) agreed. But the readiness to embrace the reforms without seeking advice could leave many at risk particularly as one in three (34%) over 55s have acknowledged they will exhaust their savings during their retirement.

Only 19% of over 55s are against the new pension legislation, with a third (32%) still undecided on whether the reforms will be beneficial for savers. Therefore Sanlam’s findings indicate that over 55s need more time and guidance in order to understand the new options for retirement income. Of those surveyed, nearly one in three (29%) said they didn’t know if they would either withdraw their pension or manage the money themselves, keep the money invested or buy an annuity.

Additional data collated by the University of Birmingham on behalf of Sanlam found a discrepancy in what consumers say and the actions they take when it comes to their retirement income; highlighting a need to design retirement solutions that allow both flexibility of income and taking a steady, regular income. This research revealed that consumers want regular, steady income more than they want flexibility of income.

Yet when it comes to their actual behaviour, those already in income drawdown take larger blocks of income, infrequently suggesting flexibility dominates. Dr Paul Cox, from the University of Birmingham, warned that about a third of consumers age 55+ with pensions either don’t know or can’t decide how they would prefer to consume their retirement savings or have yet to give  it any thought.

Alex Morley, CEO of Sanlam Wealth Planning, said:

“The confusion and uncertainty displayed by consumers impacted by the pension reforms exposes the risk that many over 55s could begin making significant changes to their lifetime savings without any form of professional advice or guidance. As the cost of living goes up and people are living longer, we could end up with a large amount of people exhausting their private pensions and having to rely on the Government to support them in their later years. Much more needs to be done to demonstrate to consumers the impact of the new pension legislation and the benefits of seeking advice before making any big financial decisions. A good financial planner will look at a person’s investment strategy over the long term, with the right level of protection in mind.”