Many savers with ‘self-invested personal pensions’ (SIPPs) are optimistic about their retirement prospects, but research suggests their confidence may not be supported by sufficient planning or preparation.
A nationally representative study of nearly 1,000 UK adults by independent consultancy Barnett Waddingham (BW) found that 63 percent of SIPP-only savers expect to enjoy a comfortable retirement. This compares to 55 percent of people saving into workplace defined contribution (DC) pensions only. Among those with a mix of pension types, which can include SIPPs, DC and defined benefit (DB) pension schemes, confidence rises to 81 percent.
However, this sense of security may be misleading. The research, part of BW’s At Retirement Reckoning report, reveals that only 18 percent of SIPP-only savers have set clear financial goals or created a retirement budget. This figure rises to 21 percent among people with both a SIPP and DC pension, and to 30 percent among those with a combination of all three pension types. However, the majority of savers are approaching retirement without a defined financial roadmap to ensure they will have what they need.
While SIPPs savers tend to engage more than others with their pension providers, many are not making full use of the tools and advice available to them. Just 39 percent of SIPPs-only savers have spoken to their provider about retirement planning, and although 32 percent have consulted a financial adviser, which is double the proportion of DC-only savers at 16 percent, a significant number are still navigating retirement decisions without professional help. Only 27 percent have used online tools to model their future income needs.
With many SIPPs holders also managing multiple pension arrangements, BW said concerns are growing around the complexity of keeping track of their retirement savings.
James Jones-Tinsley, self-invested pensions technical specialist at BW, said: “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.”
