Very few pensioners are aware of extra help available for their retirement pots.
A huge 81% of 45- to 54-year-olds with defined contribution pensions risk making the wrong financial choices in retirement by not getting free advice.
Only 19% of pension savers know they can get free independent advice from government guidance service Pension Wise, according to research by Just Group.
This is even though pension providers are meant to signpost the service.
“It’s no surprise, because the degree of support and promotion for Pension Wise has been weak,” says Stephen Lowe, group communications director at Just Group.
“We want to create a new social norm, where everybody’s in unless they opt out, because it would lead to better outcomes for individuals and society.”
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The Financial Guidance and Claims Act 2018 says savers should get a Pension Wise consultation unless they specifically opt out. But the Financial Conduct Authority is still developing the rules on implementing the new law.
Just Group’s latest study shows only 20% of men and just 12% of women aged 45 to 55 are aware they can access the free pensions consultation service. More than four million people did not know they could get this advice.
New pensions freedoms introduced by former chancellor George Osbourne in 2015 handed more choice to pensions savers, but also introduced more risks.
The big three risks are scams, a high income tax bill and lack of knowledge when making choices.
A Pension Wise consultation can help to spot scammers, give guidance on tax to preserve wealth and support people to make good choices when accessing their pensions savings.
“A consultation helps people to understand the basics and not to make poor choices and often sparks their curiosity to seek further, impartial financial advice,” says Lowe.
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A trial by the Money and Pensions Service that ended in July showed an uplift of 8% in advice taken where appointments were automatically booked for people nearing retirement.
However, overall the result was still that only 11% of pension savers took advice.
“We want the default to be that everyone is in the service, unless they actively choose to opt out. The same as auto-enrolment, but for when people retire,” says Lowe.
A record 940,000 people will celebrate their 55th birthday in the UK this year meaning more people than ever reaching the point where they are able to take pensions cash.
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