22 March 2022
The government and pensions industry must take more action to improve take-up of guidance and access to good-quality regulated financial advice. That’s one of the key recommendations in the report ‘Freedom and Choice: Public attitudes - 7 years on’ released today (22 March 2022) by the Institute and Faculty of Actuaries (IFoA). To inform the report, the IFoA commissioned a YouGov survey covering more than 2,000 adults aged over 55. It revealed that when it comes to understanding and accessing pension savings, 40 per cent of respondents took no advice or guidance at all.
The report comes seven years after the government implemented the ‘freedom and choice’ reforms allowing people to access their pensions with much greater flexibility. In 2016, one year into the new changes, the IFoA carried out research into how people were responding to the new flexibilities. One positive result has been that, compared with the initial survey, reforms are more clearly perceived as a ‘good thing’. But some challenging trends continue with over one in five respondents saying they worry about running out of money in retirement (22%). In addition, even though there is free advice available through the government’s Pension Wise service, only 22 per cent of those surveyed said they had used it.
It was clear from the research that the majority of people struggle to understand how their pension is managed and invested. Only 1 in 4 (26%) respondents said they fully understood the charges for their defined contribution pension and 42 per cent said they had no idea how their pension savings were being invested.
Leah Evans, Chair of IFoA Pension Board, said:
“While pension freedoms offer individuals much more choice and flexibility, our survey shows that many are still not confident about decisions around their pension pot as they approach retirement. Worryingly, there is also a lack of understanding around how their pension is being managed and invested.
As we discussed in our 2021 ‘Great Risk Transfer’ report, individuals, particularly those with defined-contribution pensions, are left to manage the risk of ensuring they have enough savings to fund them through retirement without knowing how long they will live.
It’s more important than ever that savers are prompted at every opportunity, by both government and industry, to take advice or guidance on their pension.
This should help them get a better idea of whether they have enough saved to provide the lifestyle in retirement that they aspire to.”
The survey also noted a gender imbalance. Nearly two thirds of men (58%) said they did not need to take guidance or advice compared to 43 per cent of women. Of those needing advice, men were 16 percentage points more likely to take tailored regulated financial advice whereas women were 7 percentage points more likely to access generic guidance from Pension Wise.
Leah Evans continued:
"It is well known that, for a variety of reasons, there is a significant gap in the level of retirement income for men and women.
Our research shows that there needs to be greater focus on finding specific ways to target and encourage those who need it most to seek appropriate advice or tailored guidance on their pension.”
Leah Evans is appearing in front of the Government’s Work and Pensions Select Committee in Westminster on Wednesday 23rd March 2022 as part of its third stage inquiry into pension freedoms and saving for later life.
~ENDS~
Contact
Sonia Sequeira, Media Relations Manager, IFoA
Tel: 07525 592 198
Email: sonia.sequeira@actuaries.org.uk
About the Institute and Faculty of Actuaries
The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.
Research undertaken by the IFoA is not commercial. As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest.
Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.
Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s of London.
Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.
The IFoA is available to provide independent expert comment to the media on a range of actuarial-related issues, including COVID-19 and its long term consequences, mortality, pensions, life and general insurance, health and care, finance and investment, climate change and sustainability, systems thinking, uncertainty and judgement, and risk management.
For all media queries please contact Sonia Sequeira, Media Relations Manager