OpinionMar 16 2015

Ideal retirement at odds with real retirement

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Ideal retirement at odds with real retirement
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For some people seeing the name of Citizens Advice in these discussions may have been unexpected. But we are well known for responding to people’s needs across a wide range of areas, and that includes pensions.

Last year we helped people with over 80,000 pension issues, and the numbers going to the pensions pages of our online advice guide have risen by 89 per cent since 2012 to over 200,000 last year.

We welcomed the chancellor’s announcement in last year’s Budget that people would have more choice and control over their pension and retirement options.

This was enhanced by the government’s commitment to offer free and impartial support to help people understand these changes. And we are pleased to be delivering the face-to-face channel of what we now know as the Pension Wise service, to ensure that people have the support and guidance they need to make informed choices about their retirement.

Over the past few months discussions around the changes to pension choices have focused on the technical and financial implications, as well as a lot of curiosity about how the new Pension Wise service will work.

There has been less focus on how people approach their choices about retirement and the different factors that inform decision-making. But in a new report published today (16 March) Citizens Advice looks in depth at how people approaching retirement think about their financial future in the context of wider circumstances.

What we have found is that people’s perception of an idealised retirement is often at odds with their real experience. Instead of retiring and being able to go on holidays or renovate their home, our ‘how people think about older age and pensions’ report reveals many people face challenges managing their money day-to-day, planning with certainty and supporting their family.

We find that people don’t think about pensions in isolation, rather in the context of other personal and financial decisions. The type of financial product people make is in fact just a small part of any pension decision.

People approaching retirement today face very different challenges to their parents. And our figures back this up: in the first quarter of 2014, of the 1,672 people who sought help from Citizens Advice about occupational and personal pensions, 50 per cent also asked for help on one or more other issues such as employment, tax and benefits, debt, consumer issues or family and relationships.

As life expectancy rises and pressures on household finances grow, many face circumstances they may not have expected as they approach retirement such as adult children needing support or older relatives needing care. During interviews for our report people told us they can struggle with such pressures, and keeping up to speed with changes that could affect them.

Many find it hard to make sense of their pension choices, particularly if they face barriers such as low numeracy and literacy skills. One woman told us: “It’s foolish to sit back and not take control, but I don’t feel tooled-up to do that. [It] makes me feel embarrassed, that I’m so financially illiterate. It’s my own pension future.”

It is comments like this which bring into stark reality how crucial the Pension Wise service will be for people as they approach one of the biggest financial decisions they will ever make. People want to be in control of their finances and able to secure financial resilience and independence in older age. But many will need support to enable them to understand their pension options and how they relate to their own situation.

Citizens Advice, the Pensions Advisory Service, the Money Advice Service and the Treasury are working closely together to ensure the Pension Wise service is up and running in time for reforms coming in next month.

We have been clear from the outset that we will be offering guidance, not advice to people and we are confident that we will be providing a high quality, consistent service online, over the phone and face to face. We issued our latest update on the new service last week, which included the news that face to face guidance will be available from over 500 locations across England and Wales.

People will have the choice of whether to access Pension Wise online, over the phone or in person. This choice is key to empowering people to make sense of their pension options and understand them in the context of their own lives, which is in turn key to the success of the new pension freedoms.

Gillian Guy is chief executive of the Citizens Advice Bureau