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Almost five million people at risk of poor pensions decisions

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Research by The National Association of Pension Funds (NAPF) has found that 4.8 million people are at risk of making poor decisions after the government's pension reforms become into effect.

The NAPF report, Understanding Retirement, explores the experience of concerns of people aged 50-70 (both still working and in retirement) in the light of the Government’s pensions reforms.

The reforms, which allow people aged over 55 to access money from their pension pots whenever they choose, come into force on 6 April.

According to the NAPF, most people over 50 postpone seeking help with decisions on their retirement finances until they are close to retirement.

The report describes the average working couple as 56-years-old, individually earning £30,000 a year in work and £20,000 retired. They have a State pension and have saved into defined contribution pensions schemes via their employers, but have little or no defined benefit pensions savings. They have significant private pension provision, but are not used to living on tight budgets.

These people now represent the largest group of non-retired 50-70 year olds, according to the NAPF, at 4.8 million people. They also have the most to gain or lose under the new reforms.

The research found 61% of people in this group said they had not yet sought advice about their retirement finances, with 48% saying they feel comfortable making their own financial decisions.

NAPF director of external affairs Graham Vidler, said with the reforms fast approaching, there was still “a great deal of uncertainty about what people should do”.

He added: “For these reforms to give savers a chance to manage their pension savings effectively, savers need three things: awareness and understanding of the guidance they can expect, outline pathways to help them make the best use of their money throughout their retirement, and products that are easy to understand, reliable and good value.”

Poor auto-enrolment decisions

Separate research from NOW:Pensions has warned that companies are at risk making bad decisions with delayed auto-enrolment applications.

The research found 17% of companies completed their application either very close to their staging date or after the deadline had passed. Three in ten (29%) took action a month before the staging date and only 20% signed up six months or more in advance of staging, which is the timescale recommended by The Pensions Regulator. 

NOW:Pensions CEO Morten Nilsson, said: “While we accept all employers and are happy to help those who’ve left it late, we strongly recommend that employers follow the regulator’s advice and make their provider selection as early as possible to avoid unnecessary stress.”