Almost half of pre-retirees ignorant of pension freedoms

Almost half of pre-retirees ignorant of pension freedoms

Almost half of those approaching retirement are either unaware of pension freedoms or don't know the impact they will have on them, research has shown.

Old Mutual Wealth’s Retirement Income Uncovered report, which polled more than 1,500 UK adults between the ages of 50 and 75, found 45 per cent of those aged between 50 and 65 were in this position.

It also found 37 per cent of this age group were still unsure about when and how to access pension freedoms.

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Introduced in 2015, the new rules allow access their pension pots before retirement.

Old Mutual Wealth’s survey also showed that when the rules came into force only 1 per cent of respondents had spoken to Pension Wise while 8 per cent had spoken to a financial adviser.

But these numbers are increasing very slowly – 3 per cent have now used Pension Wise guidance while 14 per cent have sought financial advice.

Old Mutual Wealth has urged the government to raise awareness and financial literacy.

Ian Browne, pensions expert at Old Mutual Wealth, said pension freedoms were "still in their infancy" and said huge sweeping changes "should be off the table".

He said: "People do not trust pensions and that is because legislation around it is consistently shifting."

Mr Brown said more needed to be done to encourage people to engage with their pensions.

He said: “With freedoms, people have been given power and that power means that are under increasing pressure to make good choices or their financial future could fall apart.

“However, our research shows that almost half of those approaching or in retirement still lack sufficient knowledge to make informed decisions.”

Research by the Financial Conduct Authority has found issues with the pension freedom reforms since their introduction.

The regulator found more than half of fully withdrawn pots – 52 per cent – were not spent but were moved into other savings or investments, with consumers preferring to take their money out of their pension and putting it in an Isa.

It also revealed concerns that most consumers choose the "path of least resistance" and accepted the drawdown option offered by their pension provider without shopping around. 

The Work and Pensions select committee is currently conducting an inquiry to assess whether the reforms are working.