The retirement income conundrum
Not everyone is aware of their retirement choices
Around 40% of pre-retirees, those who are 50+ and not retired, have little or no knowledge of the options available to them at retirement. And in fact, while 60% say they know at least a little about the options, only a quarter (25%) say they are aware of all the main options open to them.
Awareness differs across groups. Just over half of pre-retired women (54%) say they are aware of the choices available to them compared with two-thirds of pre-retired men (65%). Among those who are concerned about their finances during retirement, less than half (46%) are aware of the different ways they can take money from their pension, indicating that those who may have the greatest need for support are often least aware of the choices available to them.
Most of the pre-retired population have some awareness of decumulation at retirement
Most people expect to seek support before taking money from their pension
Most pre-retirees recognise that the decisions they make at retirement are important, and the vast majority plan to look for advice or guidance. Most of the pre-retired population (81%) say they would look for advice or guidance before deciding how to take money from their pension.
Vast majority of pre-retirees expect to take some form of advice or guidance
The sources pre-retirees are most likely to use are a mix of formal and semi-formal support. 41% say they are most likely to use support from their pension provider, 37% would use a free guidance service and 34% say they would use a paid adviser. Alongside this, some also expect to draw on more informal sources, such as friends and family and online information. AI tools are rarely selected as a source of advice or guidance at this stage.
A smaller group say they do not expect to seek advice or guidance (9%). Within this group, the main reasons cited are high confidence and autonomy rather than barriers. For example, 34% say they feel they know enough to decide without advice, and 30% say they would rather make their own decisions.
However, many pre-retirees seek support only shortly before accessing their pension
People are often leaving it too late to start thinking about major retirement decisions.
Only a third (34%) of people expect to take advice or guidance two or more years before retirement. In contrast, one in five (19%) expect to wait until the year they retire or first access their pension before taking advice. A further quarter (24%) either do not expect to seek advice or guidance, won’t do so until after taking money or do not know when they will seek guidance.
This could leave many savers with limited time to shape outcomes, compare options and understand the trade-offs involved in drawing on a pension. Earlier support matters because some decisions are difficult to reverse, and because tax, investment and income choices can interact in ways that are not always obvious.
Many pre-retirees expect to seek support close to retirement
Two-thirds, 66%, of pre-retirees expect to seek advice or guidance within two years of retirement or first accessing their pension.”
Household income shapes the type of support people expect to use
The type of support expected is closely linked to income. Just over half (51%) of those in the highest income band expect to use paid advice when drawing on their pension, compared with just 23% of those in the lowest income band. Lower-income households are less likely to expect to use paid advice and more likely to rely on free guidance or informal support from friends and family when accessing their pension savings. Among those in the lowest income band, two fifths (40%) expect to use free guidance services and almost three in ten (28%) expect to turn to friends and family.
This creates a clear policy challenge. The households with the least room for error may be least likely to access paid professional advice. If support is not made more accessible, retirement decision-making risks becoming another area where wealth determines outcomes.
Type of advice chosen by pre-retired population varies by household income group
Most retirees feel positive about the choices they made
Retirees generally describe accessing their pension as a positive experience. Just over half (51%) say the experience was very or fairly good, with only 1% saying they had a bad or very bad experience. Further, 54% of retirees are confident they chose the right option for their circumstances, while problems appear limited: 6% say they paid more tax than expected, and only 1% found setting up and managing withdrawals difficult.
These findings are reassuring, but they should not lead to complacency. A positive experience does not mean the decision was simple, fully understood or optimal. The 6% who say they paid more tax than expected is a small proportion, but it may not capture those who did not realise they could have paid less tax, secured a better outcome, or chosen an option better suited to their circumstances.
The retired had a positive experience taking money from their pension
Expert analysis
Graeme Bold
Managing Director, Workplace and Intermediary Wealth, Scottish Widows
Awareness is not the same as understanding
People are approaching retirement with some awareness that they have choices, but with limited knowledge of the full set of options available to them. Around 40% of pre-retirees have little or no knowledge of the options available at retirement. That matters, because the decision is not simply about accessing a pot of money. It is about balancing certainty against flexibility, regular income against control, and today’s needs against what may be left to pass on to loved ones.
Pension freedoms should be supported with better help
The pension freedom reforms have been positive for customers because they allow retirement income decisions to reflect real lives. People retire in different ways, with different health, work, family and housing circumstances. Restricting choice would not solve the underlying issue. The priority should be to make choices easier to understand and to ensure customers can access proportionate support before decisions become urgent.
Many people seek help, but often too late
It is encouraging that most pre-retirees recognise the importance of the decision and expect to seek some form of advice or guidance. The challenge is timing. One in five (19%) expect to wait until the year they retire or first access their pension before taking advice. A further quarter (24%) either do not expect to seek advice or guidance, won’t do so until after taking money or do not know when they will seek guidance. At that point, there is little time to shape outcomes and consider the full range of trade-offs.
Support is not equally available
The advice gap is also linked to income. Just over half, 51%, of the highest income households expect to pay for professional advice, compared to less than a quarter, 23%, of the lowest income households. Among lower-income households, 28% expect to rely on family and friends. This creates a risk that those who most need support are least able to access it.
Timely support can improve confidence
People often make important financial decisions with only partial understanding and relatively late support. We would encourage earlier engagement with retirement planning and we support Targeted Support, Guided Retirement and Simplified Advice as ways to help close the advice gap.
