Mind the Advice Gap – A whole generation unprepared for pension freedom

11 Jan 2016

  • Half of over-55s are not confident they can draw their pension without professional advice
  • Over a quarter of over-55s have no state pension or retirement savings
  • Almost a third of adults over 55 have not yet considered planning their retirement
  • Of those who claim to understand pension freedom, only a quarter plan to take advantage of it.

After almost a year of pension freedom, many people near retirement age still do not understand their options or how to exercise them. Many are also unprepared. This is according to new research from unbiased.co.uk, the UK’s favourite place to find financial and legal advisers.

The research found that over a quarter (26 per cent) of those aged 55+ had no form of retirement savings at all, and 30 per cent of the same age group say they have not yet considered their retirement finances.

Awareness of the different pension options was low. The option most understood (by 23 per cent) was the ability to take the whole pension pot as a lump sum. Fewer still understood the various ways to allow retirement savings to grow. Less than one in five (18 per cent) understood the option to take a tax-free lump sum and leave the rest invested. Just 17 per cent knew that they could top up their state pension, and only 14 per cent understood drawdown.     

Karen Barrett, chief executive of unbiased.co.uk, commented: ‘Some of the changes are filtering through to people, but the option that seems to have sunk in the most is the riskiest one – taking the whole pension as a lump sum. Annuities are not right for everyone, but our research reveals huge swathes of people who are not thinking about the bigger picture. It’s extraordinary that 30 per cent of over-55s haven’t even considered their retirement yet! More needs to be done to ensure people do not act in haste and repent at leisure. Many could end up with a huge tax bill they did not expect.’

Among those who claimed some understanding of their pension options, only a quarter (25 per cent) said they were likely to exercise one or more, while 42 per cent said they were unlikely to do any of them. This response again highlights the profound lack of understanding around pension freedom, given that these individuals would have to take at least one option.

The research highlights the increasing importance of professional advice in the run-up to retirement. Almost two thirds (60 per cent) of non-retired respondents said they would not be confident exercising any pension option without professional advice. Confidence was lowest (8 per cent) for drawdown.

Pension options

Full understanding (among over-55s)

Likelihood to exercise this option*

Buying an annuity



Taking whole pension as a lump sum



Taking tax-free lump sum and leaving the rest invested



Drawdown: keep pot invested and draw income as needed



Consolidating several pensions



Deferring state pension



Topping up state pension




Karen Barrett continued: ‘Pension freedom has the potential to revolutionise retirement from here on. However, it can only do that if people feel ready to take advantage of the new options and use them wisely. It seems clear that this is still a long way off. Our research paints a picture of retirees who just don’t know what to do, and so are likely to end up doing nothing, or just taking the first option presented to them. This situation needs to change, or the gap between the advised and the non-advised will just continue to widen.

‘Recent government figures revealed that each Pension Wise session costs the taxpayer nearly £500 – far more than an initial meeting with a financial adviser. There is now a risk that many who in the past might have paid for professional advice may now opt for free guidance instead. Though useful, guidance is limited in scope – it cannot assess an individual’s financial position, cannot recommend a course of action and cannot source products – all it can really do is explain. Most people will find they still need professional financial advice in order to make confident choices.

‘With an adviser you have recourse if you make the wrong decision; with guidance there is nothing. It’s no wonder so many people don’t understand their options and are now bogged down in indecision. The freedom is out there, but they need help to go and get it.’



Notes to editors:

*Unbiased.co.uk research conducted by Opinium between 13-16 November 2015, among 2,006 nationally representative UK adults aged 18+.

For more information contact:

Anna Schirmer/ Sarah Tye/Calum MacDougall, Lansons: 020 7294 3682

For expert commentary or case studies from over 250 media-friendly advisers, journalists should visitunbiased.co.uk Bluebook - The Media Adviser Network

Twitter: @unbiased_co_uk

LinkedIn: Unbiased.co.uk - Online networking for professional advisers

About unbiased.co.uk – the advice market place

Unbiased Ltd promotes the benefits of financial and legal advice to consumers and businesses and would like to thank the following companies for their support: Alliance Trust, Aviva, AXA Wealth, Canada Life Ltd, Legal & General, MetLife, Opinium Research, Prudential, Royal London and Standard Life Assurance

Unbiased Ltd - Registered Office: 12-14 Berry St, London, EC1V 0AU.  Registered in England: No. 06775878


Category: Pensions & Retirement Tagged: Pension freedom

More press releases on Pensions & Retirement