People do not want general guidance on retirement products but individual face-to-face guidance over multiple sessions as they lack a basic understanding of retirement products, according to Axa Life Invest.
Qualitiative research, carried out by Ignition House on behalf of Axa Life Invest, with 87 participants found many had not heard of an annuity and beyond this “there was a good deal of confusion about annuities and how they work”.
Most participants did not understand how the income stream from their pot would be calculated.
Axa’s research also flagged up that people did not want general guidance but personalised guidance.
The government promised in this year’s Budget a ‘guidance guarantee’.
In its current proposal the government “guarantees” that individuals approaching retirement will receive “free and impartial face-to-face guidance to help them make the choices that best suit their needs”.
The guidance guarantee is currently under consultation.
There has been much commentary as to how it can be delivered with commentators stating The Pensions Advisory Service and the Money Advice Service Service are best placed as they already have the infrastructure.
The focus groups found participants kept relating general guidance back to their personal situation and could not disconnect general guidance from personalised advice.
Simon Smallcombe, managing director of Axa Life Invest, said: “The ‘guidance guarantee’ may have to take the form of group sessions and webinars, but we found UK savers want it to relate to their own personal circumstances.
“They want face-to-face individual guidance over multiple sessions and tailored to their individual situation and needs. Guidance should be a stepping stone leading towards personalised advice.
“Furthermore, most people don’t fully realise that options besides annuities exist which might be much better suited to them. Personalised guidance must rectify this.”
Axa believes it should be mandatory for everyone to receive a ‘health check’ guidance session 15 years prior to their planned retirement age.
This should take place in the workplace, with the employer supplying the adviser, Axa said.
According to Axa, these insights suggest that broader financial education around retirement savings is needed, to both incentivise people to save through pensions and to ensure they do not face massive pension shortfalls in their old age.
Jim Boyd, director of corporate affairs at Partnership, previously said if people were approached “at least five years before retirement, if not 10 years” it would “enable them to make a logical decision”.
Mr Boyd also said he did not think one guidance session was adequate, warning that a short session would be likely to confuse people.
