Lowest earners miss out on pensions advice

Higher earners are more likely to seek independent pensions advice as they approach retirement, according to a report by the Pensions Policy Institute (PPI).

The report, How prepared are people for retirement? shows that the lowest earners use different sources, because they don’t like paying for advice, even if the funds are available within their pension.

The PPI found that people on lower incomes are therefore going to be worse off when it comes to assessing their decumulation options, as well as taking active decisions on accessing their pension savings later in life.

The report said: “Independent financial advisers are most commonly used by people who have high levels of income. People who have a low level of income use different sources because they often don't like the idea of paying a large sum of money for advice even if they have the funds available within their pension.”

In addition, the report highlighted that, for 2016, a third of people do not know where to go for guidance and advice on pensions. This is a stark increase on 2006 and 2011, as data shows more and more people are turning to search engines in an attempt to research pension savings, finding free help from online sources such as The Pensions Advisory Service and Pension Wise.

“The lack of knowledge of the pensions system remains a problem to deal with. The pension dashboard could help further this, since 21 per cent of people are asking to see the value of their pensions alongside their bank account and savings account as an aid to saving more," the report stated.

However, due to automatic enrolment, employers are being seen as a growing source of advice, with people increasingly associating pensions saving with the workplace.

Despite this, the report shows that individuals have lowered expectations about how much household income they would need once they reach retirement. In 2006, 33 per cent of people asked said they thought they would need between £25,000 and £35,000 per annum to be comfortable in retirement, however, since 2011, this is now between £10,000 and £20,000.

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