Tens of thousands of people are confused about their pensions and retirement savings according to an in-depth survey by a consumer watchdog.
Most of the savers asked about their pensions gave baffling or contradictory replies.
One in four retirement savers who have drawn money from the defined contribution pension in the past two years could not explain how they have done so, found the Financial Lives survey by the Financial Conduct Authority.
Part of the survey scrutinised how people save and withdraw money from their pensions.
The research revealed only 30% have bought an annuity, while 20% had an income drawdown arrangement and 16% had taken their pension pot in one withdrawal.
Retirement savings of less than £5,000
Around 15 million people, including the self-employed and unemployed, were not paying into a pension, with 40% of those saving for retirement admitting they had savings of less than £5,000.
But 13% of adults – which is 6.4 million people – did not know if they were paying into defined benefit or defined contribution pension.
A DB scheme offers a guaranteed lifetime income linked to the cost of living index, while a DC scheme pays benefits based on the fund value and offers no guarantees.
However, 10% of savers aged between 55 and 64 years old believed income drawdown would give them a guaranteed retirement income, but it does not.
Only a few take financial advice
Only half of the same age group understood a single life annuity would give them a lifetime guaranteed income.
Despite a poor understanding of how their retirement income options, only 6% of adults had consulted a financial advisor in the past 12 months, mainly because they viewed the cost of advice was too much.
Andrew Bailey, FCA Chief Executive, said: “I would like to thank everyone who took part in the survey. The findings give us a wealth of information which will be used to increase our knowledge and understanding of the issues affecting consumers and how to best protect them.
“The data gathered will be invaluable in helping the FCA prioritise our work. We also hope that the research will provide valuable insight for other organisations focusing on consumers and finance.”