Only 6% of pension savers want to buy an annuity with their pension savings, according to exclusive research from Moneywise.co.uk, yet 67% still want the peace of mind provided by a fixed and guaranteed income in retirement.
The results of the research - conducted across two polls, with over 1,400 respondents in total - indicate that while savers are attracted to the flexibility and choices that are offered by the relaxation of pensions rules, they do not fully understand their options.
Currently the only product that can provide a guaranteed income for life is an annuity.
When asked what they want to do with their pensions savings a significant 34% said they had absolutely no idea, 28% said they would take the cash, 15% said they would go into income drawdown. Only 6% said they wanted to buy annuity.
Rachel Lacey, editor of How to Retire in Style, said: "The new rules are fantastic but they are not a golden bullet. Savers will still have a finite pot of money that needs to last their entire retirement. From April next year there will be so many options it’s no wonder people are confused."
"Although savers like the idea of taking the cash, the reality is that a huge slice could end up being paid to the taxman. Likewise while people love to hate annuities, at present they remain the only product that can guarantee you an income for life."
From April 2015 retirees will be able to do what they like with their pension fund, whether that means taking the money as cash, buying an annuity or investing it into an income drawdown product, where your fund remains invested and you select the level of income to take.
The freedoms mean that new retirees will have to think longer and harder about their options and will have a much greater need for guidance in the run up to retirement. In recognition of this the team behind Moneywise has launched a new magazine, How to Retire in Style, which provides those reaching the end of their working lives with a comprehensive guide to the options, examining the pros and cons of the different approaches in detail.
Make the right choice
Rachel Lacey added: "Sadly there is no one-size-fits-all solution. What works for you will depend on your age, your state of health, your lifestyle, your attitude to risk and of course the size of your pension. With this magazine we explain the facts in black and white and point out the factors you’ll need to consider to help you make the right choice for your retirement."
How to Retire in Style is on sale from 9 October from leading newsagents and supermarkets or can be ordered online at moneywise.co.uk/retire.