I heard an interesting statistic the other day, which is that in America, almost 40% of retired people ‘outlive’ their pension savings. So almost 4 out of 10 retired US citizens, have effectively nothing to live on!

This got me thinking about pension statistics in the UK – sad I know!

Following the advent of Pension Freedoms in 2015, almost 50% (46.5%) of people taking their benefits have accessed the whole amount!

This somewhat frightening statistic is perhaps tempered by the fact that 88% of these people were accessing ‘small pots’ which is for pension fund values of less than £30,000; no meaningful income could be provided so may as well enjoy the capital sum. A frugal retirement beckons for most as they will be relying on the meagre state pension for the rest of their lives.

Therefore, individuals need to start planning earlier and more seriously for their retirement. Good news is those that take financial advice have an estimated £48,279 more in their pot than those who do not take advice. (source: 2015 value of advice report by unbiased.co.uk and MetLife)

Conclusion 1, make sure you identify your objectives and plan your long-term strategy with the help of an IFA.

When it comes to drawing pension benefits it pays to shop around. Pension providers are obliged to alert retirees of their ability to move their pension pot to other providers offering better terms.

Even with this statutory requirement, Financial Conduct Authority (FCA) statistics show that 64% of those who bought an Annuity did so through the original provider of their pension. With Annuities offering historically low rates, one would have thought that looking for a better return would have been a pre-requisite?

However, due to poor annuity rates, Income Drawdown is fast becoming the default option. Yet statistics show 58% of people accessed Drawdown via their original pension provider. Charges and investment options can vary wildly between providers so considering all available options is key to maximizing a secure retirement income.

With the FCA having made it compulsory for providers to alert policyholders to both the Open Market opportunities and Drawdown options, why is it that so many fail to plan and do no research?

I accept, after so many years in the profession, that many people have an aversion to pensions, seeing them as ‘complex’ and have a ‘fear’ of the unknown.

Enter stage left the IFA. A good IFA with the right experience and qualifications will inform, guide and advise, and potentially make your retirement years far more of an experience that suits you, rather than you having to fit-in with your retirement.

unbiased.co.uk (whom represent IFAs) research found that over a third (34 per cent) of those who have purchased or arranged a financial product themselves have later regretted the decision, rising to 41 per cent of males and 47 per cent of people in their twenties.

Conclusion 2: if you’re going to be a statistic, be an informed statistic; ask an IFA

Neil Dainton Dip PFS

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