More than four-fifths (82%) of employees are positive about the imminent pension reforms which come into effect on 6 April, but many remain worried about the risks attached, according to research by the National Association of Pension Funds (NAPF).
Its Understanding retirement research, which surveyed 850 savers aged 55-70, found that nearly two-thirds (63%) are concerned that their money will run out before they die and a further 44% worry that they may make bad financial decisions and lose their money.
In addition, respondents fear they will be mis-sold unsuitable retirement products (47%) or lose money because of pension scams (36%).
However, the research found that not all respondents aged 55 to 70 will make an instant decision about what to do with their defined contribution pension (DC) pot on 6 April.
Nearly half (49%) will either wait to see how things work out nearer retirement or are not sure what they will do.
Of this group, 4% said they will take their pot as cash, 5% will buy an annuity, and nearly a fifth (18%) would leave it all invested and draw a regular income. Almost a quarter (24%) will use a combination of these options.
Of the respondents that have a plan about what they will do with their pension savings, half intend to take it as cash.
In addition, a quarter (25%) of respondents with a plan intend to buy an annuity with all or part of their pension savings.
The research also found that three-quarters (75%) of people in a defined benefit scheme plan to transfer out to access the new pension freedoms.
Further findings include:
- 21% who buy an annuity believe they will be able to sell it if they change their minds.
- 77% of respondents have heard of the guidance service Pension Wise.
- 51% are likely or very likely to use Pension Wise for guidance compared to 35% who say they are unlikely to do so.
Joanne Segars (pictured), chief executive of the NAPF, said: “It is great news that days away from their launch there’s still a high degree of support for these reforms; but savers are also worried about some of the risks because most decisions now fall on their shoulders.
“It’s clear there’s much for the government and industry to do to ensure these fears do not turn into reality.
“People seem to have readily embraced the concept of pension freedoms and in particular the idea of drawdown, but people are struggling to understand what this will offer in practice.
“Industry and government will now need to work together to meet growing consumer demand and develop a market for drawdown that works for those with smaller pots.”
