In a survey of UK adults approaching retirement, just 24% felt fully financially prepared to fund their retirement. Less than half (49%) of over 50s were confident they have saved enough to ensure a ‘reasonable standard of living', while one in five had never contributed to any pensions saving scheme.
Just one in four have given a great deal of thought to when they should retire, and 8% do not believe they will ever retire. While many will choose to work in retirement, many have not taken the necessary steps to allow them to leave the workforce.
Broadly, this age group are aware of the new changes. 83% had heard of the pensions freedoms. However, understanding of specific changes was lower. Fewer than one in five knew about the abolition of the 55% “death tax”.
When it comes to making decisions over pension options, over a quarter (28%) of those nearing retirement stated they would consult with Pension Wise, while 27% intend to turn to Independent Financial Advisers (IFAs). However almost one in three (31%) said they did not intend to take any financial advice prior to or at the time of retirement.
Penny Lovell at Close Brothers Asset Management, said:
“The new pension freedoms provide those over 55 with almost unprecedented options in retirement. But a worrying number are approaching these new options with one hand tied behind their back financially, without sufficient savings to start with. For the freedoms to have the positive impact intended, people need to visualise the retirement they want to achieve, and then take the necessary steps to ensure they have the finances to support this earlier in their careers.
“The role of financial advice is as important for the younger generations as it is for those retiring. As consumers embark on pension saving, taking on enough risk within their investment strategy is crucial. Without enough exposure to growth, they will not be able to build large enough savings.
"Understanding what is an appropriate level of risk is a difficult process without guidance. Marrying financial planning with investment advice can ensure that the right strategy is taken on both sides to make the most of the finances available. The earlier this planning is considered, the more likely retirees are to meet lifestyle goals in later life.”
