Retirement options are poorly understood by most over-55s, according to new research.
People overestimate their knowledge about their retirement options and lack confidence in making their own decisions, a survey of over-55s by Just Retirement has revealed.
Most consumers underestimate their likely lifespan and have no specific plans to deal with living longer than anticipated.
The research found a £408 gap between the monthly income over-55s say they need and what they believe they will get from their pension.
Yet 72% said they were unwilling to take risks with the pension funds to increase their chance of a better return.
If they outlived their pension, 45% of those surveyed said they would release equity from their home, 40% would live on the state pension, and 9% didn't know what they would do.
Only 30% said they had a good or full understanding of the changes proposed in the Budget – this increased to 33% for those in the process of retiring.
Two-thirds of those who took part in the poll said the reforms announced in the budget would have no impact on them, while 29% said they were 'slightly' or 'much more' engaged.
More than half said they would seek professional advice about their retirement plans and they trusted this source of information the most.
Making rational decisions
Stephen Lowe at Just Retirement said the findings should help inform the debate on how the government's proposed guaranteed guidance service should work.
"We all want to see informed consumers making rational decisions about how to access their pension money when the new rules come in next year," he said.
"That's a big leap from the picture this survey paints about consumers who are confused and often lack confidence in their own decisions and are risk adverse.
"Behavioural finance studies have concluded that more choice does not necessarily lead to better consumer outcomes. People can feel overwhelmed and this often leads to inaction."
He added: "This survey shows there's still a mountain to climb before consumers are confident and informed, which means there is a lot riding on the shoulders of the government's impartial guaranteed guidance service and professional financial advice."
Details of how the government plans to arrange this advice have yet to be announced.