Half of Britons aged 55 and over (51%) admit they know little about the pension freedom rules introduced in April 2015, according to new research from Standard Life.
A further one in ten (10%) over 55s say they know nothing about the changes, which represented a complete shake-up of the UK's pensions system five years ago. Just a third of over 55s (34%) can remember the changes taking place.
The research also found that women are less likely to know about the rules than men, with 58% over the age of 55 admitting to knowing little about them compared to 43% of men.
Laura Laidlaw, Head of Customer Communications at Standard Life said: “Greater flexibility was introduced in 2015 to give people more options when it comes to their pension, both in the way pension savings can be accessed and when they can be accessed.
“The freedoms put a greater onus on people to keep themselves informed of their options when it comes to accessing their pension money. However, five years on there is still a lack of awareness. Little knowledge and understanding of the rules means people risk making decisions that are not best for them. Decisions which could have major implications.”
Under the rules of pension freedoms, you can access some of your pension from the age of 55. If you choose to take a lump sum from your pension, 25% of the amount you withdraw will be paid tax free while the remaining 75% is taxable.
Standard Life’s research of more than 2,000 UK adults found 35% of Britons aged between 55 and 64 have already accessed their pension pot, prior to State Pension age.
Looking ahead, 35% of adults aged between 45 and 54 say they will probably, if not definitely, take a tax-free lump sum from their pension at some point. Of those, 30% will do so as soon as they hit 55.
Meanwhile, 15% of adults aged between 45 and 54 say they are likely to take a taxable lump sum in retirement. Of those, almost a quarter (24%) plan to do so as soon as they reach 55.
Laidlaw added: “Particularly in the current economic climate, some may be tempted to dip into their pension savings as soon as they can. Pension freedom rules mean those aged 55 are able to do this, though taking from your pension risks locking in losses of the current stock market falls. Equally, if you are not aware of the various limitations to taking tax free sums from your pension pot, you could get doubly hit by losses.“If you are not sure what’s right for you, seek professional advice or speak to your pension provider to understand the ins and outs of taking from your pension pot. Alternatively, both the Pensions Advisory Service and Pension Wise are useful sources of impartial guidance and support.”
For further information, contact:
T: +44 (0)203 773 9545
M: +44 (0)774 214 2411
Standard Life polled 2,825 UK adults via an online survey in February and March 2020.
Notes to editors
Standard Life announced its entry into the equity release market in a partnership with retirement finance specialists Age Partnership in March 2019.
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