Many employees are still unaware of the legislative changes providing greater freedom over how they use their pensions
Against the back-drop of the recent report issued by the Work and Pensions Committee – 'Pension Freedom guidance and advice' – which concludes that the Pension Wise website is "not fit for purpose", new research from Portus, the employment benefits consultancy firm, reveals that 53% of people are still unsure what the tax rules are on taking cash out of pensions.
However, the major worries are over those who think they know – some 9% of employees believe that any cash you take out of your pension is taxed, and 5% believe it is all tax free. Another 6% wrongly believe that you can take 25% of your pot tax free every year.
Just 54% of those aged 55 to 64-years-old are aware that they can take a 25% tax-free lump sum and then potentially face tax on their funds while 31% admit to being unsure.
Portus Consulting Commercial Director Steve Watson says:
"Pension freedoms have been widely welcomed in that it gives people more control over how they use their own money. However, our research shows that more needs to be done to educate people about the changes, and employers should take a lead."
Portus has recently launched a new service called RetirePort, which aims to help employees understand their total retirement planning and shift the focus of workplace guidance and education from simply looking at pension savings. It has been launched specifically in response to pensions freedom enabling employees to take pension cash at 55-plus however they want subject to marginal tax rates.
RetirePort, provides individual guidance to employees and an online portal where they can track where they are with their pension funding alongside other investments, including property to provide a total retirement planning overview.
Employees can use the portal to outline scenarios and the impact on how they decide to take retirement income. They retain access to the service if they leave their job.
Employers benefit by offering enhanced guidance and financial education to staff which will improve engagement with retirement planning. Portus research shows 36% of workers want their employers to provide support on retirement planning rising to nearly half (46%) among those aged between 35 and 44.
The wider service alongside the online portal offers bespoke workshops for employers who can decide when and where the sessions are run as well as general and open workshops for a range of companies. Initially workshops will be run in London but will be offered across the country as the service expands.