Posted on: 18th August 2020
From IFAs,platforms, pension scheme trustees to some members of the general public, we tend to agree somewhat that literacy regarding and options is seemingly limited and can lead to decisions being made that are not in the best interest of the retiree.
A paper commissioned by PensionBee, a pension-consolidation platform, has criticised the pensions industry for allowing non-advised drawdown to become the norm despite financial literacy shortcomings leading to poor decisions. At least one in three do not take advice in retirement.
Whilst the paper showed about 50 per cent of pension savers have given a great deal of thought, the vast majority find decisions daunting, fearful of making the wrong decision or do not have a clear idea for accessing their pot.
This research is echoed by the ONS Wealth and Assets Survey which showed 45 per cent of 55-64-year-olds and 51 per cent of 45-54-year-olds were unsure or did not have enough knowledge about making retirement decisions. This roughly equates to two million people according to Just Group.
Opt-out, rather then opt-in forGuidance?
Just Group on the back of the ONS research said the pensions ‘opt-in’ should be replaced with an ‘opt-out’ system. Stephen Lowe, Group Communications Director commented that “Pension Wise.freedom and choice can only work if people are equipped to make informed decisions”. Moving to an opt-out system would encourage more people to access free and impartial guidance from
Lowe added: “Advisers help their clients deal with these challenges day in and day out but there are many more people who don’t know where to start and would benefit from advisers’ expertise.”
The benefits can be seen from efforts made by the HR department at Experian where 29 per cent of employees increased their pension contributions and 70 per cent asked for further guidance after attending a programme of dedicated seminars with another 13 per cent updated theirstrategy or retirement age.
Pensions Expert, as part of their Pension and Investment Provider Awards 2020, commented that too many savers who have been auto-enrolled see the minimum contributions set in law are a recommendation by the Government for how much should be saved and expect to achieve a comfortable retirement. Others do not engage at all with their pensions potentially prioritising other, and often legitimate, short-term goals. The remedy they say is education.
Rona Train at Hymans Robertson, an independent pensions consultancy firm, says “During their careers, most members have paid default contribution rates, used the default retirement age and invested through the defaultstrategy. Expecting them to make active decisions on what they will do with their money is unrealistic”
Why delay, start today!
We, at Pensions Guide (121 downloads) . The first meeting is always on us so it costs nothing but a little bit of time. Start the process of securing your financial future. Get in touch here or call us on 0161 495 9340 to start now!, agree with the sentiments expressed which is why we have a free