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A third of the UK population don’t know anything about the sweeping pension freedoms introduced in April 2015
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A further third are unsure what the pension freedoms mean for their retirement savings
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Improvement in retirement education, with a particular focus on younger savers, could have a major positive impact on retirement readiness
The freedoms, introduced by Chancellor George Osborne, have given people with defined contribution pensions new opportunities to access their pension savings and use this money in the way they choose from age 55. However, a significant proportion of the population remain unaware of the changes and even amongst those that recognise the term ‘pension freedoms’, many are unclear what it means.
A third (32%) of the 4,000 people surveyed in the research saying they’ve heard about the freedoms, but admit to not understanding what the changes mean for their own retirement savings. This lack of awareness grows amongst the younger age groups with 40% aged 25 – 34 years old not having heard of pension freedoms.
Despite gaps in the population’s knowledge, the reforms do seem to have had an immediate positive impact for some with 15% of people saving more into their pension as a direct result. This just highlights the potential that exists in engaging with those who don’t know about them at all and better explaining what they mean for their personal retirement savings. It seems that better promotion and education could ultimately result in millions more people taking action towards their pension savings.
Those who are aware of the reforms are generally supportive, but have expressed some concerns. Nearly one in five (19%) are concerned that they may outlive their pension fund if they take too much income and 28% are unsure where they can get support to help them with their questions.
Steven Cameron, Pensions Director at Aegon said: “Our research shows that people who know about the pension freedoms, exhibit positive behaviours towards their retirement savings, saving more and actively taking steps to make a change or to review their retirement plans. While many may think that pension freedoms are just relevant to those at retirement this simply isn’t the case and it’s encouraging that even those who are 20, 30 and in some cases 40 years away from retirement are motivated, once they appreciate the freedoms, to improve their savings habits. The earlier individuals start planning seriously for their retirement, the more likely they are to achieve their aspirations. These findings set a clear challenge to both the industry and Government to take further steps to provide new, innovative ways of explaining what the pension freedoms are, and their potential impact on the retirement prospects of individuals.
“With freedom comes personal responsibility and our industry also needs to innovate to find ways of protecting individuals from running out of pension funds when they still have many years of retirement to go.
“We also need to promote the range of sources of support for savers from information, to Pension Wise guidance, up to full professional financial advice. The recent Financial Advice Market Review is looking to plug remaining ‘advice gaps’ and these need to look specifically at wide support for pension freedoms.”
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