Adults in the UK are at risk of making poor financial decisions amid a lack of understanding of retirement options, research from Hargreaves Lansdown has shown.

Just 42% of people had a clear understanding of what their retirement options were, according to the study.

This only rose slightly to 45% among those aged over 55, highlighting the lack of understanding continued as people approached retirement.

Hargreaves Lansdown warned this left people at risk of making decisions that they can’t undo, potentially running out of money or incurring unnecessary tax bills.

The firm noted that those able to access financial advice will be supported through these decisions, and upcoming targeted support reforms will be helpful in supporting people understand what is right for them.

“Deciding how to take an income in retirement will be one of the most important financial decisions that you will make and yet the data shows less than half of people understand their options,” said Hargreaves Lansdown head of retirement analysis, Helen Morrissey.

“Awareness is slightly higher for the over-55s – but not by much – it means there’s a real risk of people sleepwalking into making bad decisions.

“This puts them at risk of a variety of poor outcomes, such as buying an annuity that is not right that cannot be unwound, or drawing down too much income early in retirement.

“This can lead to not having enough income, potentially running out of money, or incurring huge tax bills that needn’t have happened.”

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