The findings1 reveal that 9 in 10 (87%) people now want the flexibility to choose how and when they will access their retirement savings throughout retirement, up slightly from 8 in 10 (81%) back in 2015. At the same time, there’s evidence that a growing number of people value the importance of a guaranteed income, rising from 72% of people in 2015, to 79% of people today.
The findings highlight both a growing appetite to embrace the new flexibility that the pension freedoms have afforded, but also a concern about the changing shape of retirement, and a need to insulate themselves against the financial pressures that come with it. Both retirement income flexibility and security are now more important to people than knowing that their pension wealth will be passed on to their loved ones, which is a priority for just over half (58%) of the population; a figure which has remained unchanged since 2015.
For future generations, issues such as flexibility and security are expected to grow in importance. Recent research undertaken by Aegon and EValue, using mortality improvement data to reassess life expectancy statistics, shows that for a 65-year-old in the UK today the average life expectancy is higher than many expect: age 90 for a man, and 92 for a women3. The implications are that many people will live longer than expected, and will face a catalogue of challenges that were less pressing for the preceding generation. For example, the need for social care is growing by 2.8% a year in the UK2, while the average unsecured debt held by 75-84 year olds has risen by 201% between 2006 and 20144, both reasons why the demand for greater income flexibility in retirement is growing.
Steven Cameron, Pensions Director at Aegon, commented: “When the pension freedoms first arrived in 2015, we saw a renaissance in the concept of flexible access to pension savings in retirement. People could now take the driving seat when it came to accessing their savings, and the popularity of flexi-access drawdown products followed suit. Far from fading, that expectation for flexibility has in fact grown in the two years since, to the extent that the vast majority of people in the UK now want to be able to choose when and how they spend their retirement savings.
“What’s just as noteworthy is that people still want a high level of security, to be safe in the knowledge that whatever happens, however long they live, they will have a guaranteed income for the rest of their life. The two ambitions are often seen as conflicting, with drawdown and annuities often painted as polar opposites on the flexibility against security scale, designed to suit different needs. The reality is different. Two years on from the pension freedoms, the choices available to retirees in search of both flexibility and certainty have grown, and solutions such as drawdown with guarantees are helping to cover both priorities at the same time. What’s crucial is that those about to retire understand all the possible options and seek professional financial advice to help them navigate the new pension landscape.”
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