By Jonathan Watts-Lay, Director, WEALTH at work
The financial decisions that members need to take at retirement are getting increasingly complex. Whilst Pension Freedoms firmly put the control in the hands of individuals, recent events such as the global pandemic and the cost of living crisis have only added to the risks and challenges they face.
With this in mind, we conducted a survey with the Pensions Management Institute to investigate the retirement concerns Trustees have for their members.
It found that nearly all (92%) Trustees fear their members nearing retirement will face predatory attention from scammers. The strain on household finances caused by the cost of living crisis could mean that some members are more vulnerable than ever this year. With almost a quarter (22%) of UK adults having reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May this year, it’s clear that these fears are well founded.
88% of Trustees reported that they are concerned that members may not understand the tax implications of accessing their pension. After all, individuals can easily incur huge tax bills unknowingly when accessing their pension, all of which can have a material impact on income levels in retirement.
All of these risks also equally affect defined benefit members who are considering transferring their pension. Indeed, the majority (86%) of Trustees in our survey have concerns over this. It’s unclear yet if the measures put in place to enable Trustees and Scheme Managers to block or pause suspicious transfers have helped the situation, but people still need to have an understanding of whether the transfer is suitable and then how to manage this money.
When we consider all of these risks, it’s unsurprising that 73% of Trustees are apprehensive that their members’ money will run out too soon in retirement. This may be due to not saving enough throughout their life. The Pensions Policy Institute published a report warning that most of those currently over 50 do not have adequate funds to achieve a ‘comfortable’ retirement as defined by the Pensions and Lifetime Savings Association. Additionally, the Pension Freedoms and the shift from defined benefit to defined contribution pensions, has put longevity and investment risk in the hands of members, and poor decision making can be far too easy.
Support levels are encouraging – but more can be done
