The Relationship Between Pension Literacy, Retirement Planning and the Propensity to Seek Financial Advice in the Light of the 2015 Pension Freedoms

Dick, Julie (2020) The Relationship Between Pension Literacy, Retirement Planning and the Propensity to Seek Financial Advice in the Light of the 2015 Pension Freedoms. Doctoral thesis, Northumbria University.

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Abstract

This study explores the relationship between pension literacy, retirement planning and the propensity to seek financial advice in respect of pension choices. The 2015 Pension Freedoms gave more choice to individuals up to and into retirement (Taxation of Pensions Act, 2014). If individuals lack the pension literacy to understand their options, they may be at risk of making poor decisions and even running out of money in retirement (Hunter, 2017). This is particularly the case for individuals who choose not to seek financial advice (Financial Conduct Authority, 2016a; Thurley, 2015). An on-line test of pension literacy was completed by a large sample of individuals aged over 40 from the North East of England. Their actual and perceived pension literacy were measured, both separately and combined together. Logistic regression was applied to assess the relationship between both pension literacy and demographic factors on the propensity to seek advice and plan for retirement. Results found actual pension literacy to be complementary to both seeking financial advice and retirement planning. However, participants who perceived their pension literacy as good, were less likely to seek advice. Based on principal components analysis, pension literacy was deconstructed into five components and some aspects of pension literacy had a greater association with financial behaviour than others. Results also found pension literacy to be significantly different between demographic subgroups and many participants were not able to assess their own pension knowledge accurately. Of particular concern were overconfident participants who were less likely to seek financial advice compared to other groups.
This study makes a contribution to the financial advice gap (Financial Conduct Authority, 2016a) by identifying individuals who may be at risk of making poor pension choices through lack of planning or reluctance to seek financial advice. In addition, the study offers a methodological contribution having developed, with experts from the financial services industry, a diagnostic test of pension literacy. In this study, after having completed this test, participants were better able to accurately assess their own pension knowledge and for some, were more likely to seek financial advice.

Item Type: Thesis (Doctoral)
Uncontrolled Keywords: Pension literacy, financial literacy, financial advice, retirement planning, pension freedoms, perceived pension literacy
Subjects: N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Accounting and Finance
University Services > Graduate School > Doctor of Business Administration
Depositing User: John Coen
Date Deposited: 12 Jun 2020 10:39
Last Modified: 12 Jun 2020 10:45
URI: http://nrl.northumbria.ac.uk/id/eprint/43431

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