Concerns about clients underplaying pension risk

Concerns about clients underplaying pension risk

Advisers are concerned that many of their clients don’t appreciate the risks of under-saving for retirement as they do not make contributions to their pension pot beyond auto-enrolment.

Research from VitalityInvest, published today (September 25), found just under a third of IFAs believe consumers failing to save for retirement and a lack of understanding about the risks of under-saving were the biggest threats to pension accumulation.

The 200 advisers surveyed were also concerned that clients' understanding of risk hadn’t improved in the last 10 years despite changes like pension freedoms and auto-enrolment. 

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Nearly one in five (16 per cent) thought consumers were a lot less aware of pension risk and not saving enough for retirement, while 27 per cent thought clients’ understanding had neither improved nor deteriorated.

Marcus Rees of Romilly Financial Services, said the constant changes to pensions rules had resulted in clients being less aware of the rules and risks surrounding pensions.

Mr Rees said: “There have been a lot of changes to the pension rules and retirement savings allowances over the last ten years which have created additional challenges for advisers and confusion for many clients. 

“The government constantly moving the goalposts and increasing the regulatory burden has made the job of engaging people much harder. What we need is a period of stability, not more rule changes.”

VitalityInvest also found three quarters (74 per cent) of adults had never made a contribution to their pension beyond auto-enrolment or did not have a pension plan.

Nearly of third of clients said if the government set out its long-term plans for retirement it would encourage them to save more for retirement and earlier.

Meanwhile, 27 per cent have called for clearer government advice on saving for retirement.

Attitudes to retirement saving also differed between men and women with only 19 per cent of women making increased contributions to their pension beyond auto-enrolment compared with a quarter of men (26 per cent). 

Also 10 per cent of men had actively implemented positive changes to their retirement savings plan after calculating their later life finances compared with just 5 per cent of women.

But women were more likely to have considered lifestyle changes to allow them to make the most of their retirement compared to men who were 6 per cent less likely to make lifestyle changes that they considered would benefit their health in later life.

Justin Taurog, deputy chief executive officer of VitalityInvest, said: “The research shows that there are some serious concerns from advisers about consumer attitudes toward retirement. 

“Their worries are warranted and it’s shocking to see three quarters of UK adults haven’t contributed to their pension beyond auto-enrolment.

"There is clearly a role for us as a business, and the industry, along with government to help educate investors about the danger of under-saving for retirement.”

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