A recent report by The People’s Pension showed that as many as three quarters of those with a pension are ‘sleepwalking into retirement poverty’.
Since the Pension Schemes Act in 2015 granted stakeholders more freedoms in how they accessed their pension pot, many have made poor decisions based on a lack of expertise and a reluctance to spend potentially thousands of pounds on ongoing expensive pension advice, the report found.
Other key signals that may be on course for misery when they hit retirement were:
- Savers putting off planning for the future – just one in ten were found to have detailed plans for their money
- Only one in twenty having made any consideration of how inflation might impact their savings
- A general assumption across that board that they would not live to 100, despite statistical and medical evidence suggesting one in ten of those currently aged 65 will do just that.
The report found that most savers were going ahead and ‘doing their best’ on their own in terms of financial decisions relating to investment of their pension money, because of a fear of expensive advice, and that the decisions they made often appeared ‘illogical and irrational’.
From next month, a change means that those putting pension money into drawdown without taking any financial advice will be offered an investment option suited to their circumstances by their pension provider, but this really isn’t a substitute for proper planning and advice, and is likely to be a sticking plaster on what is a massive, industry-wide problem. It is highly unlikely that those whose funds are due to run out while they are in retirement would be able to sustain the sort of lifestyle they likely hope for on just the state pension, and may even have to delay or stop their retirement as a result.
It’s never too early to start thinking about getting proper advice on your retirement planning, but it’s also never too late either – none of us is getting any younger, and the better prepared you are for what comes next, the more likely it will fit your expectations.