Research shows that those nearing pension age are unlikely to be seeking financial advice or comparing different providers and could be missing out on the best rates on their retirement income as a result.
The research from the Financial Conduct Authority (FCA) reports that over half (58%) of people who put their pension into Flexi-Access Drawdown do not compare different providers and options before doing so. Instead, they continue to use the same provider they did to save for retirement. A similar number (57%) of Annuities are purchased by people from their existing pension provider, without shopping around or taking advice.
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Half of those who have accessed money from their pension say they did so without taking financial advice. The reasons given for this include:
- Believing that they knew what they were doing (59%)
- Relying solely on Pension Wise (17%)
- Lacking trust in financial advisers (14%)
- Not wanting to pay for advice (14%)
- Relying on information they found online (13%)
- Not wanting to wait for advice before accessing money (6%)
- Turning to family members for advice (6%)
The increase in confidence surrounding pension decisions is usually a good thing. But, if that confidence is unfounded and results in mistakes being made, it could lead to financial instability in later life.
The report also shows that many pensioners are failing to think practically before taking money out of their pensions. 25% are not even sure what method, for example purchasing an Annuity or Flexi-Access Drawdown they have used to access their cash. Furthermore, of those who don’t know whether they have a drawdown or guaranteed income arrangement, just:
- 32% considered other income sources
- 23% thought about their health and life expectancy
- 12% factor in the returns, guarantees and risks associated with accessing the money
- 6% were conscious of what their dependents and beneficiaries would get
Such low understanding of retirement income could result in many issues, including:
- Running out of money too soon into retirement
- Being unable to leave the legacy you want to behind
- Not using your pension in the most effective way
- Being unable to live the retirement lifestyle you have worked hard for
Creating change
So, how can you take charge and make sure that you are clued up before accessing your pension?
Two ways:
- Take financial advice:
A financial adviser or planner will be able to work with you to create a financial strategy which enables shopping around. They can also offer guidance as to what to look for when comparing providers. This will make sure that you get the best deal available to you.
- Shop around:
Alternatively, by talking to the right financial adviser or planner, you may find that you can kill two birds with one stone and plan your future, whilst letting a professional find the most suitable arrangements, products and providers for you.
For more information about retirement planning and making sure your money supports you in achieving your ideal lifestyle, feel free to get in touch with us.
