Only half of those aged 40 or above have a ‘basic understanding’ of the key factors that will influence their retirement decisions, according to Just Group’s retirement risk index.
The research also showed one in 14 (7%) of those over 40 have a high risk of making poor later-life financial choices. Half (50%) of people have enough basic understanding to be considered low risk, Just found, while 43% lacked some knowledge and so were deemed medium risk.
The remaining 7% were considered high risk, which the group said reflected poor understanding of longevity and state pension provision.
The retirement risk index, which has been set up to examine how prepared the British public are to make decisions on their later-life finances, highlighted how the knowledge or intentions of the less knowledgeable half put them at greater risk of failing to meet their own retirement requirements.
Just Group group communications director Stephen Lowe (pictured) said: “By asking questions based on capability and attitude, the index seeks to discover whether people have the basic understanding about what retirement entails and whether that affects the pension decisions they are likely to make.
“What we have found is that half (50%) have an adequate idea of what the state will provide, with those closer to retirement having a better understanding of longevity.”
He said this better understanding of longevity and the contributions of the state, coupled with realistic expectations about what they can do with their pension, meant this group were on track to avoid the worst retirement pitfalls.
“Once we focused on those who were planning to fully cash in their pension at 55, the proportion of those at high risk doubled to 14%,” Lowe continued. “This is because these age groups were more likely to want to access all their pension cash early with no intention of using it for post-retirement income.
“Guidance and advice are the best antidotes to the dangers that lurk when choosing how to use pension money, such as paying unnecessary tax or taking too much too soon.”