A third of over-55s confused about pension options

18 March 2025

Nearly a third of over-55s are unsure about certain aspects of accessing their pension savings, according to new research from Standard Life.

The survey found that only 32% of people in this age group feel confident in their understanding of their retirement income options.

One of the biggest areas of confusion is tax. A third (33%) admitted they do not feel confident about how their pension withdrawals will be taxed. Just 29% said they understood this aspect.

This uncertainty persists almost a decade after ‘pension freedoms’ were introduced that allow people greater flexibility in how they access their pension savings.

Standard Life retirement director Mike Ambery highlighted the importance of clearer communication, saying: “It’s concerning that nearly 10 years after people with a DC pension were given more choice in how to access their money as part of ‘pension freedoms’, so many people feel confused about their options.

“Providers have a big role to play in making communications as clear and targeted as possible, and greater access to personalised guidance is key.”

The cost of getting it wrong

Failing to understand pension tax implications can be costly. Standard Life’s analysis of Financial Conduct Authority (FCA) data found that between October 2022 and March 2023, more than 221 people withdrew pension pots worth £250,000 or more in full - resulting in a tax bill of at least £97,500.

Catherine Sermon, head of public engagement and campaigns at Phoenix Insights, pointed out the risks of making pension decisions without proper guidance. 

Quoted in a Corporate Adviser article, she said: “At retirement age many people are faced with complex decisions on how to use their pension savings despite often having very little knowledge or support. Without paying for professional financial advice, the twin issue of high-stakes decision-making and a lack of understanding leaves people at risk of choosing a retirement strategy that might not be in their best interest.

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Source

Nearly a third of over-55s are unsure about certain aspects of accessing their pension savings: A third of older savers confused about pension income options. Corporate Adviser. Accessed 24 February 2025.