DIY Investor Magazine
/
2015 Issue
9
SOME KEY FINDINGS OF THE SURVEY ARE THAT:
•
Generating an income for retirement was the main financial priority for the majority of those surveyed
•
One third did not know how they would use their pension pot to generate an income in retirement
•
64% had heard of the new pension freedoms but only 8% fully understood how they would be affected.
•
14% do not know what type of pension they have
•
25% believe that the State Pension will be their main source of income in retirement
•
Less than 25% of those surveyed had a clear financial plan for retirement
•
45% believed they had inadequate provision for retirement
•
Over 20% of respondents believed they would not retire before 70, if at all
•
47% of people want guaranteed income for life yet only 16% intend to buy an annuity
Detailed analysis of the survey results highlights
behavioural differences that exist between those that
have actively participated in their retirement planning
and those that have chosen not to, as well as quite
marked generational differences.
THE PLANNING GAP: WHY REALITY MAY NOT MEET
EXPECTATIONS
The M&G Investments survey established that
generating an income for living expenses in retirement
was the main financial priority for the largest
proportion of people although other results suggest
there is a gap between prioritising this goal and taking
action to achieve it.
A concerning 45% of all respondents said that they
were unsure they had made adequate financial
provision for retirement, and 31% said they had not
made a financial plan for retirement including 28% of
those aged 45-54, 42% of whom thought they had left
it too late to make up ground.
In addition to living expenses, 27% of those
approaching 55 had wider financial objectives such
as helping family members or leaving an inheritance,
although a similar proportion said that they did not
know how they would achieve this.
There was a general acceptance of the need to alter
spending habits and invest more although those
nearing retirement were pessimistic that they had time
enough to effect sufficient change and did not know
what else to do - resulting in 22% believing that they
would be working until 70 or beyond.
THE KNOWLEDGE GAP: THE NEW WORLD OF
PENSIONS
The ability to create better financial futures for
themselves and their families should be a positive thing
for many people as long as they are educated and
equipped to harness the opportunities and avoid the
pitfalls created by the new freedoms.
However, the survey suggests there remains a
significant degree of risk in this area in terms of a lack
of awareness or understanding around pension reform
so before taking action, individuals must ensure they
have engaged with the issues and understand their
options.
Whilst 64% of those surveyed said that they were aware
of changes to pension legislation only 8% said that
they fully understood the ways in which they would be
impacted.
Highlighting one of the gaps between aspiration and
reality, 47% said that they wanted a guaranteed income
for life yet only 20% said that they would be purchasing
an annuity.
Whilst there was a good level of general awareness,
one third said that they did not know what they would
do with their pension pot in retirement which was the
case for 44% in the 45-54 age bracket; what they have
decided is to eschew the Lamborghini garage – only 2%
said they were going to use some of their pot for a one-
off purchase such as a car or a holiday.
