Around three in four people risk outliving their savings in retirement, a report looking into the impact of the pension freedoms indicates.
The research found evidence many retirees risk potentially running their pension savings down. It termed this as “sleepwalking into retirement”.
The study examined retirement planning and spending habits following the introduction of pension freedoms in 2015. This gave over-55s greater flexibility in what they could do with their pension wealth.
What did the report find specifically?
The research indicates around three in four people could potentially run out of money in their mid-80s, even though they may live for longer. This is because they are spending their pension savings too fast.
Other key findings were:
- Savers are scared of planning for the future as they do not want to discover the ‘truth’
- They underestimate the financial risk of growing old and do not understand how inflation can impact their savings
- The typical saver follows the path of the least resistance. This means they do not review a product or a withdrawal rate once they have signed up.
What can we do?
The report details a few steps can provide themselves such as simplifying the products available and giving people better information. Understandably we believe most would benefit hugely from getting a proper financial plan in place.
This would encompass their investment strategy, their withdrawal strategy, and a variety of other relevant areas.
The clarity that a financial plan provides can be a massive help for someone planning their retirement. The “Truth” that this exercise may uncover might be not some want to hear. However, it is better to be prepared for something happening than to “sleepwalk” into it.
