A significant minority of people are not aware of or do not understand the pension changes that are set to be implemented in around a month’s time, research from LV has revealed, as the insurer calls for the government to step up its awareness campaign.
The research, carried out by Opinium Research with a sample size of 1,518 British adults aged over 50, showed that 12 per cent are completely unaware that any changes are due to be made, meaning many could miss out on the chance to improve their income in retirement.
It also revealed 33 per cent of those approaching retirement age do not understand the pension reforms.
Despite this lack of knowledge, just one in four over 50s plan to seek financial advice about how they fund retirement meaning that many could fail to make the most of their pension savings.
A study conducted by YouGov on behalf of Old Mutual in December found consumers who obtain regulated financial advice can expect to see a 49 per cent increase in retirement income compared to those that did not.
The LV report also found that women can expect to enter retirement with a pension pot that is 47 per cent below what the average man has. Women who have workplace or private pensions reach retirement with pots worth on average £107,000, while men can expect to retire with a fund worth £201,000.
Funding retirement is also heightened by debt burdens. According to LV, currently, 4.3m retirees have some form of debt, in the form of a mortgage or outstanding credit card debt. Furthermore, Over a third of retirees, equating to 4.4m, have given financial help and support to family members, mainly children, in the last 12 months.
Last November, pensions minister Steve Webb embarked on a radio tour to spread the word about the government’s ‘guidance guarantee’ and to answer questions on the new pension reforms set to come in next year.
However, LV said its report shows that the government needs to step up its campaign to raise awareness of the pension changes and its guidance service Pension Wise.
John Perks, managing director of LV retirement solutions, said: “We strongly support Pension Wise and it will no doubt increasingly help make people aware of the options they will now have, and encourage them to take advice, to shop around and to consider alternatives to standard lifetime annuities, for example enhanced, fixed term annuities and income drawdown, or combinations.
“We would always encourage people to seek financial advice to ensure they make the most of the savings they have spent a lifetime building. We believe that it is crucial that the industry works together to demonstrate the value of guidance and advice to savers.”
Last month, the Association of British Insurers warned the government is not yet ready for the pension reforms and not enough has been done to ensure a seamless start on 6 April, largely due to the tight timeline.
donia.o’loughlin@ft.com
