The majority of workers over 55 aren’t aware of the different options for funding retirement, according to research from OneFamily.
While pensions awareness is high (92%), other options, which may be more suitable for their personal needs, aren’t even on their radar, OneFamily argues.
62% have either never heard of or don’t understand income drawdown, 50% say the same for annuities, and 82% don’t know about enhanced annuities.
OneFamily says the low knowledge of products such as annuities could stem from the fact that since pension freedoms in 2014, they are no longer compulsory. Whilst not mandatory, annuities could still be a helpful retirement option for many, the provider argues.
Although 70% say they know what equity release is, when asked about the product names lifetime mortgages and home reversion plans, 79% and 88% respectively said that they either hadn’t heard of them or didn’t know what they were. Retirement interest only mortgages are also low profile with 23% of over 55s knowing what it is.
As well as being unsure of the options for their retirement funding, 56% say they don’t know how much state pension they can expect to receive. Furthermore, 26% are not aware that the amount of state pension they will receive is dependent on how many years of national insurance contributions they have, with 14% understanding the state pension is a set amount for everyone to claim aged 65 and over.
In addition, 56% have not spoken to anyone or even researched their retirement funding options.
Nici Audhlam-Gardiner, managing director of lifetime mortgages at OneFamily, said: “As life expectancy has risen, pensions have become more stretched, so it is vital that those planning their retirement understand all of the options available to them.
“Over 55s may believe the only option they have is to rely on meagre pension savings or the state pension, and they won’t have considered options such as lifetime mortgages, which could mean the difference between a comfortable or financially difficult retirement.
“As providers and advisers offering financial products, we need to help over 55s understand all the different options available to them, and ensure they choose the best mix of solutions for the retirement they want.
“There is a real opportunity for advisers who can give advice across a range of later life products to help more people enjoy a financially comfortable retirement.”