On the go: A think tank has called on the government and regulators to improve the nation’s pensions knowledge, after a study highlighted the significant gap in the take-up of guidance and advice.
Just one-fifth of 50 to 64-year-olds have spoken to a financial adviser about their pension, according to a survey by the Social Market Foundation, and more than two-thirds (69 per cent) of those surveyed said they do not know how much money they will need for retirement.
On average, those approaching retirement age are almost £250,000 short of the pension pot they need in order to maintain the lifestyle they would like in retirement, which the SMF says represents a total annual savings gap of £132bn across the country.
Scott Corfe, research director at the SMF, said there is a “serious” gap in the provision of advice and guidance around pensions that leads to real financial harm.
“The blunt truth about pensions is that many people don’t know enough to make the decisions that would give them the retirement they want,” he said.
“Poor information will mean poor outcomes for too many people.”
Twenty per cent of 50 to 64-year-olds with a pension have received advice from an independent financial adviser, and only 14 per cent of those accessing a defined contribution pension pot for the first time have sought guidance from the government’s Pension Wise service.
The report, which was sponsored by Phoenix Group and carried out by Opinium, surveyed 2,011 UK adults aged 50 to 64 between November and December last year, as well as an online focus group of 30 respondents participating between December 17 and 21.
The report showed that the most common reason for individuals not seeking support was “overconfidence”. Twenty-eight per cent of respondents said they had enough knowledge to take decisions without advice, with 34 per cent of men saying this compared with 22 per cent of women.
Just under half (47 per cent) of those surveyed said they had heard of Pension Wise.
The report has included five recommendations to solve this guidance gap:
The Pension Wise service should be expanded to provide tailored guidance and allow those between the ages of 40 and 50 to book an appointment.
Pension Wise’s online service should be improved, including the provision of robo-guidance and robo-modelling.
The Financial Conduct Authority should, at a minimum, provide clearer information on its current definitions of guidance and advice, including “gold standard” examples of guidance that does not stray into advice.
Make it standard practice for advice to be sought before savers can access their pension pot.
Significant investment from the government into a nationwide pensions awareness campaign to bring home the need for individuals to prepare.
This article originally appeared on FTAdviser.com
