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People still in the dark over pension freedoms…14 months on

Written by: Paloma Kubiak
Three quarters of people don’t understand the pension freedom reforms more than a year after they were introduced, according to a survey.

The research from Wesleyan found 12% incorrectly believed the pension reforms, which came into effect in April 2015, meant you can withdraw your full pension fund at any time, completely tax free when in fact you can only withdraw 25% tax free, with the remainder taxed at your marginal rate.

One in seven also wrongly believed you could only make withdrawals from your defined contribution pension once you’d retired when you’re actually able to from the age of 55.

According to the the poll of 1,000 people, four out of ten haven’t done any research about pensions in the past year, despite all the changes, while more than a third have no intention of researching their retirement plans in the next 12 months.

The research also found three quarters (73%) of people are unaware they can get upwards of 25p from the government for every pound invested in a pension.

More than half of respondents didn’t know how much to set aside for a comfortable life in retirement, though they expected to need an average of £22,596 a year, almost a third more than the actual average UK pension income, leaving a potentially very large funding gap for the average retiree.

Vicki Wentworth, chief customer and strategy officer at Wesleyan, said: “For people to enjoy the standard of living they dream of in retirement, it’s imperative they not only plan their finances now so they can afford it, but continuously review those plans.

“If what we are hearing is true, that many people have not started, nor do they intend to start, any research around what the pension reforms mean for them, then there is clearly a real and apparent need for knowledgeable, credible, expert advice.”

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