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10m pension holders don't know how to avoid running out of money in retirement

25/08/2021
RETIREMENT
  • LV= Wealth and Wellbeing Monitor highlights consumers don’t know their retirement options but are reluctant to take financial advice
  • 8m plan a DIY approach to retirement, but many don’t know how to avoid running out of money, avoid big tax bills or leave an inheritance

Research from pensions and retirement specialist LV= highlights how millions of people don’t understand their retirement options when they stop work.

The LV= Wealth and Wellbeing Monitor* - a quarterly survey of 4,000+ UK adults – reveals:


Most people know little about available retirement products 

  • More than a third (35%/ 10m) of pension holders admit they know nothing about the product options at retirement and the pros and cons of each option
  • And more than one on five (22%) those planning to retire in the next five years knows nothing about the product options at retirement

There are a lot of different retirement products available (e.g. Drawdown, Life time Annuity, Fixed term Annuity, etc).

How much do you think you know about your product options at retirement and the pros and cons of each option?

 
All pension holders£100K+ in DC pensionsPlan to retire in the next 5 yrsMass Affluent
Nothing at all35%13%22%17%
A bit45%41%47%43%
A good amount16%33%23%29%
A lot4%13%8%11%

And they don’t understand some of the big risks in retirement.

  • 35% (10m) of pension holders know nothing about how stock market falls can affect retirement savings.
  • 34% (9.9m) say they don’t know how to ensure they don’t run out of money in retirement.

How much do you understand about the following…

Base: all pension holdersThe effect of stock market fluctuations on your pension savingsHow to ensure you don't run out of money in retirementHow to take money from your pension in a tax efficient wayHow to pass on money to children/ grandchildren in a tax efficient way
Nothing at all35%34%36%30%
A bit40%40%40%42%
A good amount17%19%17%21%
A lot7%6%7%7%
  • Half of people with a pension over £100,000 don’t know a good amount about how to take money from their pension in a tax-efficient way.

How much do you understand about the following…

Base: £100K+ in DC pensionsThe effect of stock market fluctuations on your pension savingsHow to ensure you don't run out of money in retirementHow to take money from your pension in a tax efficient wayHow to pass on money to children/ grandchildren in a tax efficient way
Nothing at all10%13%11%14%
A bit39%37%40%39%
A good amount33%35%30%30%
A lot18%15%20%17%
  • Only 34% of married people understand how to ensure their spouse will be left with enough pension if they die.

Although people don’t understand their options, many are not considering taking financial advice.

  • Only 39% (10.6m) of pension holders are planning on taking financial advice when they retire, with 31% (8.3m) planning to DIY their retirement. 
  • Only half (52%) of mass affluent people – those with assets of between £100,000 and £500,000 excluding property – are planning to take financial advice.

Are you planning on getting advice from a financial adviser when you retire?

All pension holders£100K+ in DC pensionsPlan to retire in the next 5 yrsMass Affluent
Yes39%62%42%52%
No31%25%41%28%
Don't know30%13%17%20%

Attitudes to financial advice:

  • Fewer than a third 31% (16m) of UK adults think people should see a financial adviser when deciding how to access pensions at retirement. 

There are a few different reasons why some mass affluent refuse to take financial advice:

  • Nearly half (46%) of non-advised mass affluent people say they can make financial decisions on their own
  • 27% of mass affluent customers don’t want to pay for financial advice and 20% believe it would be too expensive
  • A quarter (25%) don’t think financial advice offers good value for money.

Why have you never received financial advice?

Base: those who have never used a financial adviceTotalMass Affluent
I've never made any big financial decisions30%14%
I can make financial decisions on my own29%46%
I don't want to pay for financial advice23%27%
Financial advice is for people with more money than me20%12%
I believe getting financial advice would be too expensive17%20%
I don't trust financial advisers13%24%
I don't know how I'd find a trustworthy financial adviser12%15%
I don't think financial advice offers value for money12%25%
The top occasions where mass affluent consumers feel that people should seek financial advice are: Choosing to invest a large lump sum (43%), inheritance tax planning (44%) and deciding how to access a pension (40%).

 “People planning for retirement should think hard about what they want to do when they eventually stop work. It is helpful to have a good idea of the lifestyle you want, how much it will cost and how you are going to pay for it. The more enthusiastic you are about retiring, the more likely you are to develop a robust retirement plan. Consulting a financial adviser is a good way to ensure you achieve the retirement you want.

“People have a series of big decisions to make as they approach the end of their working life and each one can make a huge difference to their retirement. For example, should they drawdown their pension in one go or over a period of time? Should they take their 25% tax free cash or leave the money in their pension fund to grow? Should they buy an annuity to guarantee an income for the rest of their lives or go for drawdown?  These are questions a good financial adviser will help answer.

“Taking financial advice is an excellent idea because it compensates for the emotional biases people have when they make big financial decisions.  A DIY approach to managing large pension funds at retirement is fraught with risk. People can easily buy the wrong products, incur unnecessary tax bills or simply exhaust their retirement funds too quickly but an adviser will provide an impartial, cool-headed approach to their client’s finances and offer solutions that the client will not even have considered. 
“Planning for retirement is complex. Doing your research and taking financial advice is good way to guide consumers through their options and ensure they get the retirement they want.”

 
Clive BoltonManaging Director of Savings and Retirement

Your retirement checklist

People approaching retirement can visit PensionWise, consult the LV= Retirement Advice Service or speak to an independent financial adviser.

Notes

* The LV= Wealth and Wellbeing Monitor is a quarterly survey of 4,000+ consumers which examines their attitudes to spending, saving and retirement. The Monitor also surveys the attitudes of mass affluent consumers, those with assets of between £100,000 and £500,000 excluding property, which are a key target market for financial advisers. LV= surveyed 4,000+ nationally representative UK adults via an online omnibus conducted by Opinium in June  2021.