Many SIPP savers feel optimistic about their retirement prospects, but new analysis from Barnett Waddingham suggests that their confidence may not be matched by the planning and preparation needed to secure a comfortable retirement.
The study, drawn from a nationally representative sample of nearly 1,000 UK adults who hold a Self-Invested Personal Pension (SIPP), forms a part of Barnett Waddingham’s (BW) “At Retirement Reckoning” retirement research. As a cross-section of the UK public, it reveals that nearly two-thirds (63%) of those whose retirement savings are exclusively held in a SIPP believe they’ll retire comfortably, compared to over half (55%) who are only saving into a workplace defined contribution pension scheme (DC pension). And for those who hold a mix of pension types (SIPP, DC and defined benefit pensions) – this confidence increases to 81%.
But this optimism could be misplaced as BW’s analysis reveals that many have not yet taken fundamental planning steps to set them up for their anticipated ‘comfortable’ retirement.
Just one in five (18%) SIPP-only savers admit they have set clear financial goals or defined a retirement budget. While the propensity to set goals or a budget rises to 21% for those with both a SIPP and a DC pension, and to 30% for those with a mix of DC, SIPP and DB pensions – the majority are still approaching retirement without fully mapping out how much they’ll need.
SIPP-only savers engage more than most with their pension providers, but a large proportion still aren’t using available advice or tools to help shape their retirement plans.
Nearly two in five (39%) of SIPP-only savers have spoken to their pension provider about their retirement planning. Additionally,while around a third (32%) have consulted a financial adviser – twice the level seen among DC-only savers (16%) – the findings suggest many are going without professional financial support. Use of online retirement planning tools remains relatively low across all groups, with just 27% of SIPP-only savers using digital tools to model their retirement income needs.
With many SIPP savers also managing multiple pension arrangements, this could raise concerns around complexity of maintaining visibility across all of their pension savings.
James Jones-Tinsley, Self-Invested Pensions Technical Specialist at BW, says: "One of the biggest challenges we face is that currently, there’s no single national picture of retirement readiness.. The fragmented nature of UK retirement savings means many individuals hold multiple pension types alongside their SIPPs - including DB and DC schemes - each with different rules, benefits and risks. The introduction of the pensions dashboard, alongside the potential for commercial dashboards, will help people visualise their full retirement position for the first time. But visibility isn’t the same as understanding. Better tools will allow people to model their options, but many will still find the choices complex and uncomfortable. Between dashboards and modelling, it may become clear to more people that they are off track - and that’s where advice will be crucial. In fact, more people may find that professional advice is not a ‘nice to have’ but a necessary part of their retirement planning. The challenge now is for the industry to ensure that once visibility improves, the right guidance, education and support structures are there to help people take informed action."
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