- But advisers warn too many savers are still relying on property
wealth and inheritance to bail them out
- Nearly two out of three advisers warn savers are not realistic about
the income they will need in retirement
Pension Freedoms are enabling better retirement planning and encouraging savers to take pensions more seriously, new adviser research1 from Prudential shows.
However, too many consumers are still relying on a combination of house price inflation and inheritance windfalls to bail them out of any retirement planning issues, advisers warn.
Prudential’s study among retirement planning specialists found widespread support for Pension Freedoms reforms, two years after their launch, with two out of three advisers (66 per cent) saying the new rules are enabling clients to better plan their retirement. More than two out of five advisers (43 per cent) say the reforms will deliver more comfortable retirements for consumers, with 58 per cent believing the changes have led to advisers being able to help more people.
But the new rules have not shifted the long-standing reliance on house price inflation to boost retirement planning. About half (51 per cent) of advisers say consumers are relying too much on rises in house prices to create wealth while 48 per cent warn savers are relying on inheritance for retirement planning.
Advisers believe savers are unrealistic about the income they will need in retirement – 64 per cent of those questioned said clients underestimate how much they will need with 54 per cent underestimating how long they will live in retirement. Two thirds (66 per cent) say their biggest concern remains the risk of people running out of money.
Vince Smith-Hughes, retirement expert at Prudential, said: “Pension Freedoms have highlighted the need for retirement planning and advisers welcome the impact of the reforms in encouraging many savers to take pensions more seriously.
“But the continuing reliance on house price inflation and inheritance highlights that there needs to be shift in attitudes, with savers still unrealistic about the income they will need in retirement and how long they will live.
“Consumers often do not understand how much they should draw from their pensions and how drawdown during a downturn can reduce the size of their funds. This underlines the role that advisers can provide by helping many retirees secure a retirement income that lasts for the rest of their lives.”
Nearly two-thirds of advisers (62%) say that failing to understand the implications of drawing down funds during a stock market downturn is one of the biggest barriers to consumers achieving financial security in retirement.