Retirement savers having to take more risks as guaranteed income shrinks

Nearly half of retirement savers are worried they are having to take more risks with their pension planning because of the shrinking options for guaranteeing an income in retirement, new research shows.

According to MetLife, 45% of retirement savers fear they have to take more risks because of a lack of choice for guaranteed income solutions for life.

Yet one in five retirement savers (20%) don’t fully understand the choices they face which would help them receive the level of retirement income guarantee they are looking for.

Its study found that the challenge for savers is real – 57% over-40s worry that low long-term interest rates are making retirement saving more difficult and 52% are concerned about not having income certainty in retirement.

Two-thirds (67%) of advisers are also concerned about the lack of choice for clients who want lifetime guaranteed income.

The report suggests the Government’s plan to launch a new financial guidance service in place of Pensions Wise and the Pensions Advisory Service provides the ideal opportunity to refocus on explaining all retirement income choices, together with their risks.

Simon Massey, wealth management director at MetLife UK, said: “Our research has uncovered a worrying gap in knowledge which has the potential to massively impact the retirement savings of a huge number of people.

“Despite almost half of savers taking more risk because of a lack of guaranteed income solutions for life, one in five admit they don’t understand the choices they face to generate this retirement income. However, if they were confident, they might see there are ways of obtaining the guarantees they want.”

“We believe retirement conversations need to change to include a wider range of options – anything that encourages this, including guarantees and guaranteed drawdown to form part of the new guidance framework, should be supported across the board.”