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Pension confusion set to leave most Londoners unprepared for retirement

Londoners are still being left confused by pensions, with more than two thirds (64%) not understanding their key features, according to new research by Wesleyan.

The research conducted by the specialist financial mutual revealed how much confusion there still is among most Londoners when it comes to their retirement planning. Eight in ten (80%) don't understand the pension freedom reforms put in place last spring.

Overall, over a tenth of Londoners (13%) incorrectly believe the reforms mean you can withdraw your full pension fund at any time, completely tax free. While a fifth (21.3%) believe you can only take a sum of your defined contribution pension once you retire.

The research also showed Londoners expect to need an average of £25,323 a year in retirement - significantly more than the actual average UK pension income*, leaving a potentially very large funding gap for the average retiree.

As the government introduces the Lifetime ISA to encourage saving for retirement, it is clear many Londoners still do not understand how much to save each month for the future, with over half (52%) saying they don't know how much they should be putting into a pension pot.

Vicki Wentworth, Chief Customer and Strategy Officer at Wesleyan, said: "Our research shows how important it is for London's citizens to get proper advice to ensure they reach their retirement goals.

"How much Londoners need in retirement depends on their own circumstances and needs, but what is clear is that many of the city's residents have an idea of what they would like to have in retirement, but aren't planning early or effectively enough to achieve it.

"Given the amount of publicity that has surrounded the major pension reforms introduced last year, we would expect to see Londoners begin to plan earlier for retirement, although our insight tells us that doesn't seem to be happening yet. While the regulation may have intended to make planning for retirement simpler and more flexible, in reality it appears Londoners are still confused.

A third (32%) have no intention of researching their retirement plans in the next 12 months, suggesting those in the dark will remain confused about what lies ahead.

The research also found almost three quarters (72%) of the capital's residents are unaware they could get upwards of 25p from the government for every pound invested in a pension.

Vicki added: "For Londoners to enjoy the standard of living they dream of in retirement, it's imperative they not only plan their finances now so that they can afford it, but continuously review those plans.

"If what we are hearing is true, that many in London have not started, nor do they intend to start, any research around what the pension reforms mean for them, then there is clearly a real and apparent need for knowledgeable, credible, expert advice."

Wesleyan, which specialises in providing specialist financial advice and services to doctors, dentists, lawyers and teachers, surveyed 1,015 people across the UK, with 254 of those from London, about their knowledge of pensions, retirement planning and the new regulations brought in last year.

* Prudential Pension Research - Jan 2016

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