Latest research conducted by LV= shows that despite the fact the pension reforms came into effect almost two years ago, only 20% of Defined Benefit scheme members are certain they have the necessary knowledge to make an informed decision about whether or not to transfer out of their scheme.
Although one in ten (11%) members want to transfer into a Defined Contribution scheme in order to access the pension freedoms, the research shows knowledge and understanding of the risks associated with transferring is low.
A quarter (25%) are unaware they may live longer than their pension savings last if they don’t opt for a guaranteed income, while around a third (36%) don’t know they might get less income now than later if they decide to buy an annuity, especially if their health deteriorates. One in five (20%) aren’t aware that inflation could impact on their investments if they transfer and, even more concerning, is the fact 38% still don’t know they must transfer into a Defined Contribution scheme to take advantage of the freedoms.
LV=’s research shows people need help with the difficult decision of what to do with their retirement income, but many aren’t sure where to get it from. Employees have access to various sources of information while they are saving into a pension, however half (50%) don’t understand the role and responsibilities of their employer or trustee when it comes to planning for their retirement which means they could be missing out on a key source of support.
Mary Stewart, Head of Corporate Solutions at LV=, said:
“The freedom and choice reforms have given everyone, including Defined Benefit members, greater access to their money. However, there is a risk that unless consumers are given adequate information and know where they can turn to for support, they could miss out on making the most of their pension pot.
“Our research has unearthed a fundamental lack of understanding among members about their options. We believe the industry must move away from producing communication material that solely complies with regulation, and instead focus on the needs of the consumer. Scheme trustees have a duty to provide their members with information in a simple, clear way to ensure they can make the right decision. LV=’s Corporate Solutions service puts emphasis on educating members to understand the issues they’ll face in retirement and recognises the importance of personalised retirement advice and on-going support.”
LV= Corporate Solutions offers retirement guidance and advice to organisations and their employees, for members of both Defined Benefit and Defined Contribution schemes. To find out more about LV=’s unique tailored approach visit www.lv.com/corporatesolutions.