Half of Britons aged 55 and over (51 per cent) admit they know little about the pension freedom rules introduced in April 2015, according to new research from Standard Life.A further one-in-ten (10 per cent) over 55s say they know nothing about the changes, which represented a complete shake-up of the UK’s pensions system five years ago. Just a third of over 55s (34 per cent) can remember the changes taking place.
The research also found that women are less likely to know about the rules than men, with 58 per cent over the age of 55 admitting to knowing little about them compared to 43 per cent of men.
However, awareness of pension freedoms is higher among over 55s that currently receive financial advice. Almost two thirds of Britons (62 per cent) that currently receive financial advice say they have detailed knowledge of pension freedoms, compared to a third (33 per cent) of over 55s that have never received financial advice.
Alastair Black, Head of Platform Proposition at Standard Life, says: “Pension freedoms put a greater onus on people to keep themselves informed of their options when it comes to accessing their pension money. However, five years on there is still a lack of awareness. Little knowledge and understanding of the rules means people risk making decisions that are not best for them.
“It is encouraging to see those that receive financial advice are more familiar with the rules. It underlines the value of advice especially as Britons have more choice than ever before as they head into retirement. And our research shows engaging an adviser is still the best way for people to navigate their options.”
Standard Life’s research of more than 2,000 UK adults also found 35 per cent of Britons aged between 55 and 64 have already accessed their pension pot, prior to State Pension age.
Looking ahead, 35 per cent of adults aged between 45 and 54 say they will probably, if not definitely, take a tax-free lump sum from their pension at some point. Of those, 30 per cent will do so as soon as they hit 55.
Meanwhile, 15 per cent of adults aged between 45 and 54 say they are likely to take a taxable lump sum in retirement. Of those, almost a quarter (24 per cent) plan to do so as soon as they reach 55.
However, only 28 per cent of adults over the age of 45 who are yet to retire are looking to pay for any form of financial advice as they approach retirement.
Black adds: “In the current climate, we know many advisers are hearing from clients keen to dip into their pension savings as soon as they can. Pension freedom rules mean those aged 55 and over are able to do this, but they may not realise that taking from their pension now risks locking in losses of the current stock market falls.
“Those with a financial adviser are more likely to understand the pitfalls of taking a tax-free lump sum from their pension pot, which is why our research showing so many people nearing retirement are not planning to take any form of advice is concerning.”