Less than two-fifths (39 per cent) of people agree they have a clear understanding of their retirement options, according to research from Hargreaves Lansdown, which revealed ongoing confusion around retirement planning.

The research showed that this confusion persisted among those close to retirement age, as 45 per cent of those over 55 understood their options, while 55 per cent did not.

Hargreaves Lansdown, head of retirement analysis, Helen Morrissey, said that despite the biggest financial decisions being made around retirement, such as deciding when and how to retire and how to draw an income, the data showed there are “worrying gaps” in people’s knowledge that risk the wrong decisions being made.

“Only 39 per cent of people said they had a clear understanding of their retirement options. The remainder either said they didn’t or just weren’t sure,” she said.

“For many, these decisions are many years away, and there’s time for them to do their research.”

However, Morrissey said that even for those over 55 there is a knowledge gap that needs to be addressed.

She suggested that it was “concerning” that only 45 per cent of those over 55 said they clearly understood their options, as at this age many people may not have stopped working but can access their pension.

“At this stage, many people will be giving retirement more serious thought,” Morrissey said.

“Some may have a clear retirement date in mind, others may look to take a more phased run into it by winding down work over a number of years.

“These decisions will have big impacts on how income is taken so needs to be planned for.”

In particular, Morrissey said that savers need to consider what they want such as a guaranteed income and what they need to take into consideration such as provision for a spouse and inflation-linked product or level.

She said that considering these options is “vital”.

In addition to this, Morrissey also said savers need to be aware that with income drawdown, the pot remains invested in the markets and be comfortable with the risk of that.

She noted that people must be aware of the “perils” of taking out too much too quickly and the problems that may cause, as well as thinking about what happens if markets dip and what it means for people’s budgets if they have to cut back withdrawals.

Morrisey also stressed the importance of making use of all the support that is available, whether that be financial advice or guidance services such as Pension Wise.

“The Financial Conduct Authority’s work on the advice guidance boundary will also spell good news as it will enable providers to offer more support than they previously have been able to by letting them suggest more personalised options,” she added.

“Being able to offer such support could be a real gamechanger in helping people make more informed choices around retirement.”

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