More than half (59 per cent) of adults aged over 55 do not know how to ensure they will not run out of money in retirement.
Data from LV revealed how the majority of UK adults have limited knowledge of how to make the most of their pension savings.
Findings from its wealth and wellbeing research, a survey of 4,000 UK adults, revealed many people heading towards retirement are risking their own financial security because they do not know how different financial decisions they make now could impact their future.
Over 65 per cent of UK adults over the age of 55 said they did not know how to take money from their pensions in a tax efficient way.
Almost a third (30 per cent) of UK retirees had never heard of a fixed term annuity, while 51 per cent have never heard of an enhanced annuity.
Gwen Haggo, savings and retirement sales director at LV, said: “The latest findings from our wealth and wellbeing research programme revealed that many people are confused by the different retirement options to choose from.
“It can become even harder to plan effectively for the future if you’re not equipped with the correct knowledge."
The research revealed those who would never consult a financial adviser are significantly more likely to say they don’t know what to do with their pension at retirement (65 per cent) compared to those who have seen a financial adviser (45 per cent).
Over half (60 per cent) of investors said they had never heard of smoothed investments, despite almost two-thirds showing interest in a product that softens the impact of stock market volatility.
Haggo added: “The role of financial advice is important to help determine what to do to achieve enough savings for a comfortable retirement, for example saving into a private pension.
“As annuity rates have risen in recent months, adding a fixed term annuity to a portfolio could ensure a reliable income in a higher interest environment.”
With interest rates still high, annuity rates have followed suit, making them better value than in previous years, LV said.
Blending annuities with drawdown investment options, like smoothed funds, could mitigate the volatility of the stock market on the approach to and in retirement, while minimising tax implications through a pension wrapper.
sonia.rach@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
