New Fairstone survey highlights worrying trends in at-retirement behaviour

One-third of respondents do not know where they would go for advice

An independent Ipsos MORI survey of more than 2000 people published today by Fairstone, one of the UK’s largest Chartered financial planning firms, examines current attitudes to savings and investment options at retirement.

Respondents were asked to comment on whether they had heard of seven different terms relating to pensions, yielding some surprising results:

  • 48% of respondents had heard of an annuity
  • 39% of respondents had heard of additional voluntary contributions
  • Only 26% had heard of income drawdown
  • 25% had heard of defined contribution
  • 22% had heard of defined benefit
  • Just 16% knew of the 2015 pension freedoms
  • 10% had heard of encashment
  • 30% of those surveyed had heard of none of these terms

As might be expected, the higher the age range, the more familiar respondents were with these terms. However, with a focus on providing personal finance education in schools and the publicity surrounding the 2015 pension freedoms, the survey results are a cause for concern.

Of those respondents with a pension plan in place, 82% held a company or workplace pension, and 34% had either a personal pension or SIPP. 

Pension Freedom

When asked whether respondents aged 55 to 75, who have a pension plan, had taken a lump sum from their pension, 70% said that they had not taken a lump sum, whilst 25% had taken some of their pension as a lump sum and just 2% had cashed-in their entire pension as a lump sum.

Those that had taken some or all of the money in their pension as a lump sum used it as follows:

  • 20% of respondents used it for home improvements
  • 12% to buy a new car
  • 16 to pay for a holiday
  • 16% to pay off debts
  • 16% to use as income to retire early
  • 14 to pay off a mortgage
  • 7% to use as income but not to retire early
  • 3% to pass on to children or grandchildren

 

Finding Pension Advice

When asked about choosing a source of advice to help decide how to draw a pension, there was a difference between those who had already retired and those who had not. 19% of those already retired used a financial adviser, 14% relied on their pension provider and just 8% relied on friends and family for advice. Of those who were yet to retire 20% said they would ask friends or family, 17% would use an independent financial adviser and just 11% would speak to their pension provider.

Of those not yet retired, 31% did not know where they would go for retirement advice.

Commenting on the results, Angela Murfitt, Chartered financial planner at Fairstone said:

“Saving into a pension can be one of the most important decisions for any individual for enhancing their financial lives post-retirement. It is important to look across the spectrum of options and the pension freedoms of 2015 have done much to open different paths for savers. Seeking quality financial advice is vital during this process.

“Financial plans are perishable and need to be reviewed regularly to ensure that they remain current and suitable for the intended purpose. Plans often need to be adapted to meet changes in objectives or new circumstances and to rebalance funds to ensure risks remain under control and within the boundaries originally decided upon. It is foolish to expect to set out on a course, never check on progress and to later arrive at the destination and find things have gone as planned. The danger here is that, when things don’t go to plan, the years have passed and there is no time to make amends, so the only option is compromise. Compromise may mean future financial insecurity, living life on lower income and not having the financial capacity to enjoy life but merely survive it.”

Peter Savage, Chartered financial planner at Fairstone added:

“Worryingly, 52% of respondents currently do not have a retirement plan in place. You may ask how is this possible given the recent introduction of auto-enrolment workplace pensions. If we look at the ‘at retirement’ financial landscape over the last seven years, there has been an increase in activity within this market due to the baby boomer generation reaching retirement age. These people represent the majority of the saved wealth within the UK and as they move into retirement, the statistics highlighted that the next generation do not have sufficient plans in place.”

To find out more about the options available to you, contact Fairstone on 0845 605 0689 or email info@fairstone.co.uk for further information.

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