Pension freedoms causing confusion and longer careers for UK's older workers, study shows

Older workers are now planning to retire later because of pension concerns, the research found

Over-55s were previously required to purchase annuity products with their defined contribution funds, but greater flexibility brings with it the risk more people will run out of money (Getty)

Almost two-thirds of working over-55s in the UK have admitted they are confused by the rules around pensions since the government introduced more freedom to the sector in 2015, according to a new study.

Pension freedoms, launched by the former chancellor, George Osborne, give everyone aged 55 years and older greater flexibility on how to use their defined contribution pension funds, where previously they were required to purchase annuity products with their savings.

Research from Prudential shows that 64 per cent of over-55s say they are confused by the regulations, while 82 per cent want the government to stop making changes to pension rules.

Meanwhile, 42 per cent are concerned about running out of money during retirement and 41 per cent are worried about paying for long-term care.

People are growing increasingly concerned because the pension freedoms have shifted responsibility for making a pension fund last through an entire retirement directly onto the consumer, according to Vince Smith-Hughes, a retirement income expert at Prudential. These fears have caused some to plan a longer career in order to put more money in their pension pot – about 12 per cent of over-55s say they or their partner will work full-time or part-time past their original planned retirement date.

“Previously most people bought an annuity to guarantee an income for the rest of their lives. Now they can drawdown as much money as they like but the risk is that they run out of money in their lifetime,” Mr Smith-Hughes said.

“The fact that many over-55s are preparing to work longer and save more highlights that they recognise this risk and are responding in a rational and responsible way. The best thing most people can do to ensure a comfortable retirement is to take financial advice, while also trying to save as much as they can into a pension, especially a company-based scheme where they’ll immediately take advantage of contributions from their employer.”