Retirement savers flip to FACEBOOK for pension data as different recommendation is just too advanced

Retirement savers are turning to Facebook for vital information about their pension savings, one of the nation’s biggest providers warns.

Those approaching retirement have switched from talking to family and friends about their pension choices to using social media platforms, in particular Facebook groups, the workplace pension provider People’s Pension has found.

Together with consultancy Ignition House, it has followed the habits of a group of retirement savers since pension freedoms were introduced a decade ago.

It says they are increasingly struggling to make firm decisions about their pension savings due to the complexity of choices available and the cost of financial advice.

The report added that pension providers’ efforts to help savers understand their retirement options were often overwhelming.

Pension-specific Facebook groups are now filling in the gap, despite the fact information posted by members may not always be correct.

Pension information too complicated 

Couples approaching retirement are drawn to the easy-to-access, entertaining pensions information in Facebook groups, the report found.

There is an array of decisions to make when approaching retirement – when to retire, what lifestyle you would like in your later years, whether to take a tax-free-lump sum, if you want to buy an annuity and how much you need to withdraw from your drawdown pot.

Pension providers have created planning tools for savers as well as guidance services. But those approaching retirement, who find this confusing, have shunned the official information in favour of peer-to-peer advice.

Two in three of those older than 66 who use the internet are on Facebook, which makes it the prime spot to discuss pension options.

Options include the Epic Retirement Club with almost 630,000 members, Early Retirement UK with 103,000 members and Pension Chat UK with 43,000 members.

Groups are communities of Facebook users where members can post words or photographs and other members can reply.

Kirsty Ross, of People’s Pension, says: ‘Savers are still faced with too much complexity and the wrong kind of support, so it’s no surprise that many are turning to social media for help instead of professional sources. 

‘The system isn’t giving people the clarity or confidence they need to make decisions that will shape the rest of their lives.

‘The reality is that the nice, clean vision for retirement of policymakers and pension providers rarely plays out smoothly in practice. Real-life retirement journeys are far more complex.’

For example, pension providers often assume their customers want to rationally plan for retirement. But in reality, savers are scared of starting to plan as they don’t want to find out the truth about the value of their pots.

This gap means retirees turn to other places to get their information and talk about their retirement choices.

Savers are ‘sleepwalking’ into retirement

Savers are ‘sleepwalking’ into their retirement, the report also warned, as those approaching pension age have a short-term mindset regarding their pot of savings.

The retirees interviewed were shocked at how little an annual income drawing down from a pension pot could provide. They were told that a £100,000 pot could provide a sustainable income of £5,000 a year, or half that for a pot worth £50,000, which astounded the savers.

This goes a little way in building the £31,700 annual pot a single saver needs for a moderate lifestyle in retirement, according to the Pension and Lifetime Savings Association’s Retirement Living Standards.

Those who chose to drawdown are in a state of ‘disengagement’, People’s Pension found, as they are complacent with their finances.

And many of those who do take a regular income from drawdown have a ‘set and forget’ approach, where they take the same amount each month and do not change this based on stock market movements or their spending needs.

It means they could soon run out of income if they do not carefully monitor their pots.

Many of those interviewed assume if they do run out of money from their pension pots, they will simply rely on the state pension, which currently stands at £11,973 a year for those on the full, new state pension.

This will rise by the highest of 2.5 per cent, inflation or wage growth under a mechanism known as the triple lock.

The cohort assume in later years they won’t be doing much and so their spending will be lower. 

However, they may also have higher spending due to the need for care.

Tax-free lump sum taken ‘in the moment’

The tax-free lump sum is a tempting prospect for those approaching retirement as it can be used for home improvements or to pay off any remaining mortgage.

However, the report found the cash is overwhelmingly taken ‘in the moment’ rather than as part of a long-term plan.

Everyone who saves into a personal or workplace pension is entitled to take 25 per cent of their combined pension savings tax-free.

There are a few caveats – you must be 55, or 57 from 2028, and you can’t take more than £268,275 tax-free. 

That means if you have a pension pot of more than £1.07million, the tax-free amount you can withdraw is curbed.

Instead of carefully planning how this lump-sum fits into their overall pension plan, swathes of savers are taking it early, often while still working, the report found. 

It is overwhelmingly seen as a personal savings pot which can be dipped into for holidays or a new car, rather than money earmarked for retirement.

Despite this, none of the savers surveyed said they regretted taking their tax-free lump sums.

The popular lump sum perk was a contender for the chop in Rachel Reeves’ Budget, but the Chancellor ultimately decided to keep it in place.