With many over-55s having no idea what their pension is worth, and many lacking clear financial strategies for their retirement, the need for solutions is more desperate than ever, two pieces of research have revealed.
Millions of over-55s in the UK are at risk of encountering financial difficulties in their retirement, My Pension Expert has claimed.
The UK adviser commissioned an independent survey of 2,000 UK adults, and found that less than half (46 per cent) had a financial plan in place for their retirement; the figure rose 47 per cent for those aged 55 and above.
My Pension Expert found that 51 per cent of UK adults knew much was is in their pensions, rising to 56 per cent among those aged 55 and above.
The research also revealed less than a third (32 per cent) of over-55s were confident they would retire with enough money to achieve their desired lifestyle.
Dashboard cannot come ‘soon enough’
Only 16 per cent of over-55s regularly used the services of a wealth manager or independent financial adviser (IFA), while just 19 per cent have spoken with an IFA in the past 12 months to help them understand how to adapt their pension plans to the current economic climate.
Lily Megson, policy director at My Pension Expert, said: “This research shines a light on a hugely important issue for those approaching retirement. Without knowing the value of their pension, and without a clear financial plan to achieve their desired lifestyle in retirement, millions of Britons are at risk of an unstable financial future.
“It is crucial that those nearing retirement take the time to evaluate their finances and their financial strategies. When necessary, they should seek guidance from experts. No one has to forge their plans alone – IFAs can help an individual understand their situation and advise on how to reach their long-term financial goals.
“The government can do more to help, too. The long-awaited pension dashboard cannot come soon enough. We have to make it easier for people to track their pension pots – this is a crucial stage in empowering people to take control of their financial futures, ensuring they can make the most of their hard-earned savings and achieve their retirement dreams.”
Older employees unprepared for retirement
Fintech Cushon’s research also found that employees who were closer to retirement were more likely to not know how much they had saved – 41 per cent of employees aged over 55 don’t know the value of their pots compared to 28 per cent average of all UK workers.
Cushon said its research found nearly a third of savers (28 per cent) had already lost track of at least one pension by the age of 35.
Cushon’s white paper Fixing the problem of multiple pension pots pointed to a lack of clarity over the value of pensions pots as being symptomatic of the low levels of engagement that still plague UK pensions.
It claimed this was an issue that takes root much earlier in employee’s career and with employees aged over 55 having worked an average of six jobs in their careers, they will have paid into numerous pension schemes during that time and have accumulated savings in several pots.
Juggling pension pots
Steve Watson, director of policy and research at Cushon said: “Millions of older employees are sleepwalking their way into retirement with no idea of whether they’ll be able to afford the lifestyle they’ve spent decades working towards.
“Some of these savers will only be a few of years away from retirement and with many juggling multiple pots they not only risk losing track of them but make it harder for them to know if they have enough saved.
“It needs both government and providers to take the lead here. For government, pushing through the delayed introduction of the pensions dashboard is just a first step - supporting pot consolidation by allowing automatic transfers when employers change workplace pension providers would be a major leap forward.
“Also, the Government’s proposals on small pots, which we support, is great but the issue of lost pots is not just limited to small pots it’s an issue across the board. Providers need to be embracing technology and simplifying how savers engage with their pensions, by removing jargon and offering apps allowing people to easily manage their savings should be an industry standard.”
The issue of small pots
In July the Department for Work and Pensions (DWP) launched an eight-week consultation after a call for evidence which flagged up a multiple consolidator approach as a possible solution to the issue of deferred small pots.
In its paper Ending the proliferation of deferred small pots Laura Trott, minister for pensions, said the growth of deferred small pots had been a longstanding issue which presented huge challenges to the automatic enrolment pensions market.
Without intervention, it warned that deferred small pots would result in wasted administration costs of a third of a billion pounds per year by 2030 for pension schemes and would severely reducing the value for money the schemes can provide to their members.
The call followed work undertaken by the PLSA and ABI led, small pots co-ordination group.
The call for evidence, closed earlier this month, with the The Pensions Management Institute (PMI) and Association of Consulting Actuaries (ACA) among a growing number of industry bodies who have voiced their preference to see the formation of clearing house system instead of a central registry.
