Thousands of retirees ‘relying on blind luck’ upon entering drawdown

Thousands of retirees are entering drawdown without calculating the amount of income they can generate, according to new research from Zurich.

The insurance provider found that 66 per cent of pensioners entered drawdown without financial planning.

Since the introduction of pension freedoms in 2015, there has been over 435,000 people that have moves their pensions into drawdown, with just a third calculating the income they could generate from their pension pot.

Furthermore, 34 per cent planned for how much money they would need to cover day to day expenses and the same percentage considered how long their pension pot would need to last.

Zurich also found that only 22 per cent of respondents planned for leisure activities, such as going on holiday or out for dinner.

Commenting on the findings, Zurich head of retail platform strategy, Alistair Wilson, said: “Many retirees in drawdown are relying on blind luck to make their savings last throughout retirement.

“But by taking simple steps to work out how much they can afford to take from their pot, savers can avoid withdrawing too much, too soon. Setting a sustainable level of income in drawdown can be something best done by speaking with a financial adviser, or getting free guidance from Pension Wise.”

Only 16 per cent decided where they would invest their drawdown funds to achieve the desired income and as few as 17 per cent decided which strategy they would use to withdraw income.

Inheritors are also seemingly in the dark, with just 19 per cent of retirees in drawdown ensuring that their partner has the financial knowledge and understanding to continue managing their investments.

Additionally, just 15 per cent of respondents have put a financial plan into place if they or their partner were to pass away.

Wilson concluded: “Many people don’t like talking, or even thinking, about themselves or a loved one passing away.

“However, to pass wealth efficiently and not leave loved ones swamped by complex financial decisions it’s important that those set to receive inheritance are engaged with financial conversations from the outset.”

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