Half of adults don’t understand pension freedoms

More than half of UK adults have not come to grips with the changes to pension rules introduced in 2015, according to St James’s Place (SJP) research.

In addition, of the sample involving 380 people aged 18 and over, 40 per cent remain confused about the way pension withdrawals are taxed.

Ian Price, divisional director at SJP, said:“Participants in the study were often confused about what their options were, the age at which they could access benefits, and even how much their pension was worth.

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“For those looking for help and information, the government’s free Pension Wise service is arguably a good starting point. But general guidance provided by the government should not be seen as a replacement for face-to-face financial advice.”

The study also found that, regardless of whether financial advice had already been accessed, almost all respondents (94 per cent) considered it to be at least ‘quite important’ before or at retirement.

Meanwhile, more than half interviewed said they are likely to seek services of a financial adviser for pension advice.

Mr Price said: “Perhaps unsurprisingly, individuals exhibiting a high level of financial sophistication are more than twice as likely to be interested in their pension, have a greater propensity to seek financial advice, and also expect to retire earlier with a higher annual income.

“However, more than half of the less financially sophisticated group claim little or no interest in the topic of pensions and retirement. That lack of interest leads to a lack of knowledge and to insufficient planning, which risks undermining their confidence in the future.”

Adviser view

William Hunter, director at Edinburgh-based Hunter Wealth Management, said: “I find it shocking that individuals, many of whom are approaching retirement, are completely apathetic to what is going on in the retirement arena, a year on from the pension freedoms.”