On the go: Pension scheme members nearing retirement are ill-prepared for the problems they face when accessing their pensions, ranging from paying too much tax, to running out of money before the end of their days, or even losing their life savings to scams, according to a new survey of trustees.
Despite the retirement minefield, research conducted by Wealth at Work and the Pensions Management Institute has revealed that only 21 per cent of trustees are providing or facilitating regulated advice for their members at retirement.
Sixty-one per cent of trustees indicated that their schemes do not even provide or facilitate one-to-one financial guidance for members at retirement.
The joint report warns this may be the last opportunity to help savers avoid making expensive mistakes that could affect them for the rest of their lives.
Trustees of defined contribution schemes are legally required to signpost to free and impartial services, such as the government’s Money and Pensions Service. However, the same requirement does not apply to defined benefit.
Nearly nine out of 10 trustees fear their members nearing retirement will face predatory attention from scammers, and eight out of 10 trustees believe members are not equipped to deal with the taxation implications of accessing their pension, according to the research.
Eighty-five per cent of trustees have concerns on risks their members face if they transfer out of their DB schemes, while almost two-thirds of trustees are concerned that their members’ money will not last the duration of their retirement.
Jonathan Watts-Lay, director at Wealth at Work, said: “These findings indicate that pension scheme members coming up to retirement are likely to be ill-prepared and blissfully unaware of the potential problems ahead when accessing their pension, and perhaps suggest why the majority of trustees worry about a lack of engagement from their members.”
He added that, unless more support is provided, it is likely that many savers will make poor decisions at retirement.
The report suggests that trustees turn to financial education and guidance to help members understand their different options at retirement, including any potential risks.
“Offering members access to regulated advice and a means of implementing their retirement income option(s) is also a great way to help members access reputable providers – rather than leaving them in the dark,” said PMI trustee group forum chair Chris Parrott.
Steve Webb, director of policy at Royal London, said that given the high levels of trustee concern reflected in the survey, the challenge is now for trustees to decide what action they plan to take to help members.
“Trustees will not want to get into providing advice, but it is essential that they help members to access high-quality, impartial advice, which will reduce the risk of members falling prey to scammers,” he said.
