Many consumers value the flexibility pension freedoms offer but struggle to understand the options and manage the risks, especially without financial advice, according to financial ratings specialist AKG, part of Defaqto.
The report, sponsored by Fidelity and Standard Life and titled ‘Ten Years of Freedoms – Lessons, Gaps, and the Road Ahead’, finds that fewer than half of consumers are aware of pension freedoms, and only 27 per cent understand how the reforms affect them, while 19 per cent say they do not.
Of those aware, 71 per cent value the flexibility and 59 per cent are balancing risk and income. But 45 per cent worry about running out of money, and 44 per cent find retirement planning more confusing.
Additionally, around 41 per cent of advisers say increased flexibility raises the risk of pension depletion, while 43 per cent report client confusion over retirement options. And over half of advisers see the reforms as a positive development overall.
The report also highlights a divide between advised and unadvised consumers, with those with financial advice benefiting from structured strategies such as cashflow modelling, while unadvised consumers are left to navigate complex choices alone.
Additionally, only 29 per cent of consumers say they would seek help from a financial adviser, and just 20 per cent are willing to pay for advice.
AKG communications director Matt Ward says: “Whilst flexibility has empowered more personalised retirement journeys, it is also increasing the risks of poor financial outcomes. Consumers are making life defining decisions without full understanding. The right combination of guidance, accessible advice and innovation will make freedoms work better in the next decade.”
Standard Life head of retail intermediary distribution Warren Bright says: “With freedom has come great responsibility – people need access to the right support to take a clear view of their options, make the right decisions and ensure their money lasts. The role of advisers has never been more important for society with full financial advice remaining the gold standard.
“However, if we want to continue revolutionising people’s retirement prospects across the next decade, we need collaboration between government, regulators, providers and advisers to take positive steps towards helping more people when it comes to making major financial decisions around retirement. We know that many are unwilling or unable to seek advice and addressing adequacy and access are key. The ongoing consultation on Targeted Support, if implemented properly, has the potential to address the balance where worryingly 90 per cent of people are making retirement decisions unsupported.”
Fidelity Adviser Solutions head of adviser distribution Paul Richards says: “Platforms, with their comprehensive package of solutions and wrappers, are exceptionally well- placed to support advisers and their clients through the whole retirement planning journey – both pre- and post-retirement. Not only do they provide clients with choice and value for money, advice firms stand to benefit as well through increased efficiencies and complementary platform services.”
