Three-quarters of savers aged over 55 would prefer to have guaranteed pension savings rather than income invested in financial markets, research by the International Longevity Centre UK (ILC-UK) has found.
The study surveyed 5,000 people aged 55-70 and found that 75% do not want to take the risk of investing their pension pot in financial markets.
The ILC-UK asked savers with defined contribution (DC) pensions about their priorities in retirement:
- nearly 70% want a guaranteed income
- 7% want to buy expensive items such as cars of holidays
- 5% will use some of their savings on debt repayments.
Consumers lack financial understanding
The research suggests that many savers lack the necessary knowledge to make informed decisions about their financial future. Of those with DC pots:
- half understood how annuities work
- 20% were aware of enhanced annuities
- 35% knew about income drawdown products.
The research also found that just 4 in 10 of those surveyed have plans for the future in place. Additionally, more than 40% of people who were less than 1 year away from retirement have no financial plan.
“Significant challenges”
Commenting on the survey findings, pensions expert Dr Ros Altmann said:
“Even after decades of pension saving, many people have no understanding of the most important aspects of the pension system, which leaves them at risk of making poor decisions.
“The opportunity of more freedom and choice in future has the potential to deliver better value from retirement savings, but much work still needs to be done to help savers understand their options.”
Baroness Sally Greengross, chief executive of the ILC-UK, warned that “significant challenges lie ahead” and that guidance services would not be enough:
“An advice market that works for the many and not just the few is also needed – including mass market advice that meets the needs of those with limited to moderate net wealth. And critically, there is an urgent need to determine how we support those who fail to take guidance or for those who take guidance but are still liable to making poor decisions.”
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