Two million defined contribution savers that received and read their annual statement said they did not understand it, according to the Financial Conduct Authority, with many savers displaying a vulnerability to financial harm.
Publishing its Financial Lives Survey 2017, with responses from around 13,000 adult consumers, the FCA found that 0.4 million adults that accessed their DC pension in the last two years, admit that they do not understand their access options at all, or even that the option exists. Eighteen per cent of DC savers that accessed their pension in the last two years do not know if they have taken an annuity or gone into drawdown.
It found that just 35 per cent, have given a great deal of thought to how they will manage in retirement; and 35 per cent of DC savers do not know how much their employer contributes to their pension.
In addition, it found that fifty per cent of UK adults display one of more characteristics that signal a potential vulnerability to financial harm. It said they may be at increased risk of harm, or would suffer disproportionately if harm occurred. However, it stressed that vulnerability does not mean financial harm will occur. The FCA found that the risk of vulnerability increases for those in older age brackets; for example, for those aged 75 and above, the figure is 69 per cent, and increases to 77 per cent for those over the age of 85.
In terms of pensions, the FCA found that 23 per cent of all UK adults have experienced one or more unsolicited approaches, which could potentially be a scam, by calls, emails or text messages. Those approaching savers claim to be from the government, and offering retirement planning advice or a free pension review, a request to access a personal or company pension before the age of 55; the chance to unlock a pension early and get money, or the offer of a ‘loan’, ‘saving advance’ or ‘cashback’ to take advantage of a pension deal, or offered either the chance to make a high‑return investment, to buy shares in a company, or both.
FCA chief executive Andrew Bailey said the findings “give us a wealth of information, which will be used to increase our knowledge and understanding of the issues affecting consumers and how to best protect them”. The Financial Lives Survey 2017 is part of the FCA’s broader focus on the consumer, following on from its Ageing Population and Financial Services Occasional Paper published last month. It will also publish an overarching strategy ‘Approach to Consumers’ later this year.
AJ Bell personal finance analyst Laura Suter said the survey results, which show 13 per cent of UK individuals have less than £10,000 of savings, with 57 per cent having less than £5,000, shows how “perilous” many Brits’ finances are.
“Just 6 per cent of people have used regulated financial advice in the past year, highlighting the advice gap in the UK at the moment. Despite the work done over recent years by the industry and regulator, the British public are still wary of the financial services industry, with only a third thinking financial firms are honest and transparent, while just 40 per cent say they are confident in the industry.
“The lack of private pension provision in the UK is also cause for concern, with 31 per cent of individuals having no private arrangement. We would expect this number to increase in the coming years as auto-enrolment continues to loop more people into pension savings – but it’s surprising this figure isn’t already higher as 9.6 million people have already been auto-enrolled.
“The data on pension scams, showing almost a quarter of respondents have had an unsolicited approach about their pension or investment that might be a scam in the past 12 months, shows how important it is for legislation like the pension cold calling ban to be pushed through parliament to stop people being robbed of their life savings by scammers.”
Subscribe to our newsletter to receive breaking news by email.