Its latest report, sponsored by Fidelity, analysed the section of the population who will reach state retirement age within the next 10 to 15 years and found 12% were a high risk of making poor retirement income choices.
It said these people had built up defined contribution (DC) savings but had no additional defined benefit (DB) pension to fall back on. Those at most risk have between £19,400 and £51,300 of DC savings with no DB savings, the report said.
It added that without help either through guidance or advice, or suitable retirement defaults, these people would be at “high risk” of making bad decisions.
Fidelity said the group holds more than £20bn of retirement savings. It added a “poor decision” could result in a 20% drop in pension income over a person’s life.
A further 29% – or 1.6 million – aged 50 to state pension age in 2014 will be at “medium risk” of making poor decisions. PPI said these are groups with over £6,300 in DC savings, with little or no DB back up.
The report, How complex are the decisions that pension savers need to make at retirement?, added a high proportion of adults in the UK have poor numeracy skills which hinder their ability to assess suitable options when making large financial decisions.
It also stated making retirement income decisions is one of the hardest financial choices people have to make.
It is rocket science
Fidelity director of retirement Alan Higham (pictured) said no one should feel bad about asking for help.
However, he said the reputation of financial advice had been “demonised” in the recent past and it was essential all financial advisers working in the at-retirement space demonstrate their integrity and past good work.
He also warned consumers do not understand complexity and value simplicity and ease – making them “sitting ducks” for fraudsters.
Higham suggested the Financial Conduct Authority (FCA), government and industry all work together to help customers safely navigate the new landscape.
He explained: “The FCA could demand firms take steps to evidence people understand the key issues through ‘safety net’ checks. If it does not do it, hoping the industry will come up with it itself is wishful thinking.”
Higham also said it was very important the guidance guarantee built firm links to reliable expert help.
