Though half of today’s over-40s have a basic understanding of the key retirement factors that will influence their retirement decisions, one in 14 are at “high risk” of failing to meet their requirements, according to new data published today.

Just Group’s Retirement Risk Index examined the understanding of key retirement factors such as longevity, the level of state support pensioners can expect to receive and attitudes towards accessing and spending private pension savings in those aged over 40.

The index revealed that half of them had enough basic understanding to be considered low risk, while 43% who lacked some knowledge were at medium risk. The remaining 7% were high risk, demonstrating a poor understanding of longevity and state pension provision, coupled with potentially “extravagant spending plans”.

Commenting on the findings from the index, Just Group communications director Stephen Lowe 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 effects 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. Coupled with realistic expectations about what they might do with their pension, it leads us to conclude they are on track to avoid the worst retirement pitfalls.”

However, he highlighted that the youngest respondents (those aged between 40 and 44) and those aged just under 55 (the age at which most people can access their pension savings) were more likely to fall into the “high risk” category.

“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%,” he added.

“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.”

Lowe argued that, while knowledge and intentions may “generally be adequate”, there was a difference between avoiding bad choices and actively making good ones, underlining the importance of reinforcing knowledge with impartial guidance and regulated advice.

He said: “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.”

“We are seeing record numbers of people accessing their pension pots flexibly and, as it’s still too early to know the longer-term consequences, it is crucial that the industry strives to support consumers with their decisions wherever possible. The results of this research are reassuring yet that should not be a cause for complacency or inertia moving forward.”

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