New research has warned that many retirees could be at risk of running out of money during retirement because of a lack of advice and guidance on the recent pension freedoms.
According to the study by Zurich UK, around 430,000 people have taken advantage of new pension freedoms to draw down their retirement savings, yet many have never actively invested in the stock market. Despite being first-time investors, tens of thousands have not sought regulated financial advice or guidance, even though they have an average drawdown pot of £153,000.
The study highlights that poor decision making in drawdown can lead to consumers taking on too much risk, missing investment growth or making unsustainably high withdrawals.
According to Zurich, the ‘first-time investor gap’ is being driven by a lack of consumer understanding of drawdown, with almost half of novice investors who had not received advice saying they thought drawdown would be simple (47%). A further third (29%) claimed they were confident in their investment decisions, despite having no previous experience of actively investing.
“As double the number of people choose drawdown over annuities, Britons clearly favour the freedom and flexibility, but the issue is that many appear to be underestimating its complexity,” explained Alistair Wilson, Zurich’s Head of Retail Platform Strategy. “In the build-up to retirement, many savers rely on pension firms to make investment decisions on their behalf, meaning that in drawdown there is a danger they could end up picking the wrong investments or taking money out of their pot too quickly. This is putting a worrying number of people at risk of running out of money in retirement.”
If you need advice or assistance concerning pension freedoms or unlocking your pension, or for anything else regarding pensions and other financial matters, contact our expert team today. Call us now on 0141 280 6240 or complete our online enquiry form. We look forward to helping you plan your future.