Research from Fidelity International1 has found that despite pension freedoms being introduced more than six years ago, a quarter (25%) of people aged 55-64 are still not aware of the reforms.
This is even more concerning when considered alongside the fact that the Office for National Statistics (ONS) has reported over a quarter of furloughed workers are aged 50 years and over (1.3 million)2, and that three in ten older workers currently furloughed think there is a 50% chance or higher that they will lose their job when the scheme ends.
Lack of knowledge of the reforms can mean some people may be unaware of all the considerations associated with deciding to access their pensions early, such as making sure they have enough income to last throughout retirement.
Out of those who are aware of pension freedoms, 41% of those aged 55-64 – many of whom will have had the opportunity to access their pension under the reforms – believe that the decision to raise the age limit for taking pension income from 55 to 57 in 2028 is a good idea, demonstrating an understanding of the potential consequences of taking your pension too early and the benefits of giving your investments more time to grow.
With almost a million people due to turn 55 this year3, Fidelity highlights the ways in which employers can support those employees thinking about their next steps.
Commenting on the research, Maike Currie, investment director for Workplace Investing at Fidelity International says: “The past year has been tough on household finances, and many employers are looking at how they can support their employees’ wellbeing not just today but for the future as well. The reality is that during the pandemic, many people may have had to reduce their work hours, their savings or the amount they put into their pensions, which will all have a serious knock-on effect now we are coming out of lockdown. As a result, those over fifty-five may be looking to pension freedoms as a safety net.
“However, despite it now being over six years since pension freedoms were introduced, it’s concerning that a significant number of people approaching retirement still don’t know what they mean in terms of accessing their pensions. This lack of awareness and understanding reinforces the need for greater education and engagement when it comes to pensions and retirement planning.
“While the advent of pension freedoms has provided flexibility for many and given retirees more control over their later-life savings; it has also increased the chances of those who don’t fully grasp the considerations of drawdown running out of income during retirement. Both the benefits and these risks are something that employers should be aware of.
“When thinking about later-life planning it’s important to seek support and advice where possible. New solutions, called Investment Pathways, can help people navigate the world of the retirement decisions and improve their financial situation. While they are no substitute for personalised independent financial advice, they can help savers on their retirement income journeys.
“Online tools and calculators are also becoming an increasingly popular solution for showing how even small increases to pensions can make a significant difference during retirement. Fidelity offers individuals the ability to see how long their retirement savings could last depending on their current savings patterns for example, providing an open and accessible way for savers to understand if they are on track.”