Consumer education: one of the biggest challenges to success of freedoms

Consumer education and understanding is one of the biggest challenges to the success of the pension freedoms, advisers have highlighted.

According to new research by Prudential, advisers consider consumer understanding and awareness of the freedom and choice reforms as the biggest concern around the policy.

Prudential noted that while 81 per cent of advisers supporting the reforms and a further 30 per cent believing the new rules have been very successful.

With consumer awareness being one of the key concerns regarding the flexibilities, advisers also noted that other concerns include the risk of mis-selling, fraud sited by 41 per cent of advisers and unexpected tax bills, voiced by 45 per cent of advisers. Almost half, 49 per cent, of advisers noted that the potential of savers running out of income in retirement was a concern.

To overcome these challenges, 26 per cent of advisers suggested offering increased subsidies for advice in the workplace and a further 23 per cent said that they would support employers being able to offer guidance and facilitate advice.

Prudential retirement income expert Vince Smith-Hughes said: “This research highlights just how beneficial it is for people to take high-quality advice as they approach the end of their careers. People approaching retirement like the idea of being able to access their pension funds but there are many pitfalls that advisers can help them avoid.

“Advisers recognise that a lack of understanding can lead to consumers drawing too much money and running out of money too early in retirement, incurring unexpected tax bills or saving their money in inappropriate types of investment.

“The earlier those approaching retirement engage with retirement planning, the better.”

Smith-Hughes added that contacting the government’s Pension Wise guidance service and seeking advice should allow savers to improve their understanding of their options.

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