Pensions  

Warning over pensions as nine in 10 fail to seek advice

Warning over pensions as nine in 10 fail to seek advice

Savers are turning their backs on pension consolidation out of confusion, as a mere one in ten have sought financial advice in the past year, according to research.

Pensions fintech firm Dunstan Thomas found three quarters (74 per cent) of Generation Xers, aged 40 to 55, have never consolidated any of their pensions.

At the same time the firm's 53-page report, out today (June 19), found just 9 per cent of the 2,011 Gen Xers surveyed had consulted an IFA in the past 12 months, with 84 per cent tending to make decisions about their pensions alone or together with their partner.

Almost half (44 per cent) said they would choose to not consult anyone at all, while 13 per cent relied on the national media’s personal finance pages for information.

Adrian Boulding, director of retirement strategy at Dunstan Thomas, said there was an opportunity for IFAs to offer a service to employers in which they advise new staff on their existing legacy pensions.

Mr Boulding said: “This is becoming increasingly important in the auto-enrolment world because your pot does not follow you automatically. So you’ll inevitably be leaving another AE pension pot behind you when you move jobs. 

“As working patterns become more flexible, the average of 2.1 pensions per person amongst Gen Xers will only rise unless a pensions consolidation advice service is offered via employers. Offering it in the workplace could make it more cost effective and timely for both parties.”

Mr Boulding believes the number of dormant pots and unconsolidated pensions is likely to surge this year as more people are made redundant on the back of Covid-19.

The research found more than a third of Gen Xers (37 per cent) who have been exposed to four or more compulsory redundancy events in their working lives have four or five unconsolidated pensions already. 

Those that had taken voluntary redundancy four or more times had an average of four unconsolidated pots. 

There is also a worry among those approaching the age when they can access their pension that they have not saved enough to have a comfortable retirement.

When Dunstan Thomas asked what Gen Xers planned to do to alleviate the problem of retirement income shortfalls, the largest group (36 per cent) said they were prepared to work beyond planned retirement age. 

A slightly smaller percentage (31 per cent) were prepared to be poorer in retirement; whilst 26 per cent were determined to save more than they were currently between now and retirement. 

Half (53 per cent) of Gen Xers planned to take on a part-time paid job in semi-retirement and more than a quarter (27 per cent) had decided they would definitely do so. 

Mr Boulding said: “Gen Xers are going to forge a new normal for retirement, with 40 per cent of them already telling us that they will never fully retire. The old ways of giving up work while still perfectly fit and able will become the preserve of a shrinking wealthy elite.