Poor choice of pension products can make older Brits dissatisfied and depressed in retirement, research by Legal & General and Demos found.
Analysis of the English Longitudinal Study of Ageing has found evidence of a link between health and well-being and the choices people make about how they use their pension savings.
The research found bad product decisions can have the biggest impact on Britain’s poorest 50 per cent of retirees. Out of them, those who have had put their money into investments were twice as likely to have not enjoyed their life over the past week (19 per cent) than those with a guaranteed income for life (9 per cent).
The same group of people was also more likely to report that they had felt ‘sad’ for much of the past week (22 per cent), compared to retirees who knew exactly what income they would get month-to-month (15 per cent).
According to analysis by Demos, up to 50,000 people in the lower income bracket who either defaulted or made the choice to move their pension into investments, may now be finding life more difficult as a result.
Guaranteed income provided surveyed retirees, not surprisingly, with a feeling of safety when looking ahead. Retirees in the lower income bracket who didn’t have a guaranteed income were more likely to feel that they couldn’t plan for the future (13 per cent), compared to those who did (5 per cent).
More than third of retirees (38 per cent) on poor or modest incomes who had put their pension savings into investments felt they couldn’t control their future.
L&G said it looked “to raise awareness about the need for the industry to support consumers” and “help them to make more informed choices about their income in later life” by commissioning the report.
The provider said the study’s findings reiterated results from its previous surveys, which found annuities provided retirees with the security and guaranteed income that they placed as their top priority in later life.
L&G retail retirement income managing director Emma Byron says: “Our research with Demos shows that in the face of more choice, consumers need better guidance and support to understand how the financial decisions they make can affect their retirement journey.“
“Pension freedoms is still settling into the retirement landscape, but it is clear that thousands of consumers are potentially choosing or defaulting into options which could be damaging not just for their financial circumstances, but for their health and well-being too.”
“This isn’t just about drawdown or the positive role annuities can play. What really matters to us at Legal & General is that these consumers, particularly those on lower incomes, have the information, guidance and advice they need to make an informed choice about how they want to use their pension savings.”
“As an industry, we have a duty of care to support customers when it comes to making decisions about income in later life, and we all clearly must do more to engage the public to guide them towards a better retirement.”