Over a fifth (22%) of clients come to financial advisers too late for retirement planning, as the benefits of taking early advice “cannot be overstated”.
This is according to Invesco’s UK retirement study, which also found that 64% of advisers said people who seek advice during accumulation have a better understanding of pension options than those who only take advice at retirement.
Additionally, 79% of advisers said running out of money during retirement is a top client fear.
The study stated that defined contribution (DC) savers now represent the dominant source of retirement income.
Still, 32% do not spend as much of their pension, even when they can afford to, because they dislike the idea of their pension savings going down.
Invesco added: “Fear of outliving savings may lead to an unnecessarily frugal retirement and a reduced quality of life.”
The fear of the unknown is preventing retirees from spending, with advisers saying the top concerns are health costs (35%), worry about seeing their savings post diminish (32%) and a desire to leave an inheritance (28%).
Additionally, over half (51%) of advisers are not satisfied with current retirement products and 75% are calling for product innovation to help meet the evolving needs of DC retirees.
Also, more than a quarter (29%) of non-advised retirees do not actively seek any retirement information.
Pensions Freedoms that were introduced in 2015 do offer flexibility and choice, “but navigating this without expert knowledge or guidance can be incredibly difficult”.
Advisers have said there are three major misconceptions among their clients. The first is underestimating how much they need to save (51%), secondly understanding their life expectancy (47%) and finally miscalculating likely retirement spending (46%).
Invesco’s said these misconceptions are often the result of low pension engagement throughout accumulation.
Invesco head of DC client engagement Mary Cahani said: “DC pensions are increasingly becoming the primary source of income for new generations entering retirement. This shift has highlighted significant challenges related to the uptake of financial advice, the adequacy of pension savings and the quality of decumulation products.
“Addressing these issues has become an urgent priority, especially following Rachel Reeves’ Mansion House speech, which emphasised the need for a comprehensive pension review.
“We are observing that collaboration across the industry is vital for maintaining a strong focus on member outcomes throughout the entire retirement journey. Most importantly, it is becoming clear that collaboration and member engagement need to be represented earlier in the process, particularly during the transition from saving to spending, so that individuals are better equipped with the necessary advice and guidance when looking to access retirement solutions that ensure an adequate level of retirement income.”
In order to obtain these results, Invesco surveyed 151 retirement focused advisers and 500 consumers with at least £50,000 in DC pensions either at or in retirement.
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