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Pension freedom gains at risk from cost of living crisis

Pension freedom gains at risk from cost of living crisis

New research has found the gains from pension freedoms are at risk from the cost of living crisis and worries about running out of money.

The actuaries AKG found that advisers believe there has been an evolution in retirement planning since the introduction of pension freedoms in 2015.

However, the cost of living crisis puts this retirement planning progress under strain in some areas.

The report, published in partnership with insurance providers Abrdn and Scottish Widows, surveyed 2,000 consumers and 100 financial advisers.

The survey found that advisers are generally optimistic about pension freedoms, despite the challenges created by high price inflation.

According to those advisers surveyed for the research, how people prepare and save for retirement is changing.

The most significant concern for those planning their retirement was running out of money in later life, with 42% of consumers saying this was their biggest worry.

The second-biggest concern among those surveyed was the impact of high price inflation, with 40% stating this, followed by the effects of care costs in later life, expressed by 31% of respondents.

For advisers, the top two concerns for their clients were investment volatility (67%) and the impact of rising long-term inflation (59%).

According to Matt Ward, communications director at AKG, a prolonged period of low inflation could have been baked into assumptions, potentially destabilising retirement plans. Ward said:

“The industry, therefore, needs to be both helpful, practical and realistic in the way in which it seeks to educate and address these issues with a wide range of pension customers.

The research also identified a lack of understanding about pensions, with 28% of consumers saying they did not understand the main elements of these retirement planning vehicles.

AKG said that the flexibility and choice created in the pensions framework in 2015 were welcomed by many.

Still, the lack of understanding by a significant number of consumers demonstrated the need for the correct information and advice to avoid poor outcomes in retirement.

If you’re already retired or planning to retire, your Wealth Plan will be designed to help you be less anxious about tomorrow – Wells Gibson actively supports our clients to make the retirement decisions at the right time and for the right reasons.

The Wells Gibson team are always here to support you, please do not hesitate to contact us with any concerns or queries.