The Institute and Faculty of Actuaries is calling on the government and the pensions industry to improve guidance and financial advice take-up.
This call for action stems from a report published by the industry body on March 22 which showed that when it comes to understanding and accessing pension savings, 40 per cent of more than 2,000 adults aged over 55 surveyed took no advice or guidance at all.
The research, published seven years after the introduction of pension freedoms in 2015, showed that there are still some challenging trends, with only one in five individuals (22 per cent) of those accessing their savings using the government’s pensions guidance services, such as Pension Wise.
The survey also showed a gender imbalance, with nearly two thirds of men (58 per cent) saying they did not need to take guidance or advice compared to 43 per cent of women.
Of those needing advice, men were 16 percentage points more likely to take tailored regulated financial advice whereas women were 7 percentage points more likely to access generic guidance from Pension Wise.
A limited understanding of how pensions work still lingers on. Despite a high proportion of respondents claiming that advice was not necessary (51 per cent), only one in four (26 per cent) individuals ‘fully understand’ the charges they are paying for their defined contribution pension, with 17 per cent admitting to ‘not understanding at all’, the IFoA report showed.
Similarly, only a third of savers (31 per cent) were aware of how their pension savings are invested, with 42 per cent having ‘no idea’, it added.
Leah Evans, chair of IFoA pension board, noted that “while pension freedoms offer individuals much more choice and flexibility, our survey shows that many are still not confident about decisions around their pension pot as they approach retirement”.
“Worryingly, there is also a lack of understanding around how their pension is being managed and invested,” she said.
Evans, who will appear in front of the Work and Pensions committee on March 23 as part of its third stage inquiry into pension freedoms and saving for later life, argued that individuals, particularly those with DC pensions, “are left to manage the risk of ensuring they have enough savings to fund them through retirement without knowing how long they will live”.
“It’s more important than ever that savers are prompted at every opportunity, by both government and industry, to take advice or guidance on their pension. This should help them get a better idea of whether they have enough saved to provide the lifestyle in retirement that they aspire to.”
Maria Espadinha is editor at FTAdviser's sister publication Pension Expert
