49% of people surveyed are concerned that they will not have enough pension savings to be comfortable in retirement, new analysis from Citizens Advice shows.
The national charity has found that 59% of people over 50 say that a key hope for their retirement is to have enough income to support the lifestyle they want, with many also wishing to take holiday, travel and stay active. Yet 24% are afraid of their pension savings running out.
The new report Approaching retirement finds many people are unaware if their pensions savings will be enough to fund the life they hope to have and identifies the barriers which stand in the way of people getting to grips with their pensions.
The study finds 22% are confident they know the exact value of their pension pot. Of those who do not know the value of their pension:
- 18% have lots of small pots and do not know how to calculate their combined value.
- 21% believe that their pot is too small to be worth looking into its value.
- 15% don’t want to think about their pension as they don’t want to think about their retirement.
- 18% do not know how to find out more about their pension.
Based on a survey of almost 1,400 UK people over 50 and in depth interviews with people aged 50 – 65 with DC pensions which they had not yet accessed, the Citizens Advice research identifies three barriers which stop people getting to the bottom of what their pension is worth.
- Fear of the unknown: People worry that planning now could result in wasted effort if circumstances, such as the economy, changes in their personal lives or amendments to pensions policy happen before they start withdrawing their pension.
- Multiple income streams: Three quarters (74%) expect to rely on at least one non-pension income stream in their retirement. This can make it more difficult to work out how much they will get, as the value of non-pension incomes like the sale of a house or business can fluctuate.
- It is on the ‘to do list’: Reviewing their pension was something they need to do or have on their ‘to do’ list but that they hadn’t got around to doing so yet.
As well as identifying the gap between people’s hopes for later life and their understanding of their pension savings the reportalso looks at the triggers which start people saving for their retirement or encourage them to increase pension contributions.
The report highlights the introduction of auto-enrolment as an important measure to help more people save but adds that it alone will be unlikely to get pension saving levels to where they need to be in the long run.
Stronger triggers such as automatically increasing pension contributions when people change job or get a pay rise are needed to support greater saving rates, along with action to tackle minimal pension saving rates among self-employed people and those on a lower income.
Gillian Guy, chief executive of Citizens Advice, said: “People know what they want from retirement but not whether they can afford it. At the end of their working life a person’s key hope is to have the income they need to support the lifestyle they want. Yet many are in the dark about whether they are saving enough to be comfortable.
“The recent pension freedoms offer consumers more choice but people must be encouraged to explore their options and start thinking earlier in life about how they will fund the retirement they wish for. The introduction of Pension Wise guidance will help many people get to grips with their pension options and the outcome of Financial Advice Markets Review should be that it is easier for people to be able to also access independent financial advice when they need it.”