Savers undecided on pension choices

More than three-quarters of over-55s have not yet considered or do not know how they will access their pension funds under new freedoms being introduced in April.

From April, savers aged 55 and over will be able to decide for the first time how they access defined contribution pension funds.

They will be able to choose to buy an annuity, providing a fixed annual income for life, to take their whole pension fund in one go, with 25 per cent tax-free, or take smaller lump sums when required – with a quarter of each withdrawal tax-free – and take a regular taxable income from the remainder.

Financial services group True Potential carried out a survey of more than 2,000 savers about their plans for financing their retirement and found that of those aged 55-64, 76 per cent had not considered or do not yet know the way in which they would take an income or a lump sum from their pension. The figure rose to 82 per cent for respondents aged 65 and over.

The survey findings, published on 23 February, also revealed that only five per cent of all respondents would choose to purchase an annuity although 43 per cent believed a consistent income was the most important factor in retirement.

True Potential managing partner David Harrison said: “The main message we can take from these results is that there is indecision in the market at present. That is not uncommon in the aftermath of significant changes such as those we have seen in pensions, but it does mean there is now some urgency to explain what new options are available to savers.

“My main concern is that many thousands of people on the brink of retirement now find themselves with new options that they are either not aware of or do not fully understand. In those circumstances, there is a high possibility of making the wrong decision and regretting it later. I would advise anyone in that position to seek professional advice.”