The government has received a boost over its plans to liberate pensions after a major study by the National Association of Pension Funds found close to a third of pensioners will save more for their retirement as a result of the reforms.
Critics of the plans had warned that savers would simply spend their savings and fall back on the state. The data suggests this potential hit would be more than offset by those making greater provision as a result of pensions becoming more attractive savings vehicles.
However, despite this and plans to provide guidance to those approaching retirement, the regulated advice sector looks likely to miss out on the pension saving surge as respondents also signalled they would not be prepared to pay for full financial advice.
Less than half, 43 per cent, said they would be prepared to contribute to the cost of guidance, with only 3 per cent saying they would pay as much as £200 and not one of the more than 2,000 respondents saying they would pay more than £500 for “face to face, independent advice”.
Chancellor George Osborne announced in his Budget speech that everyone will be entitled to “free, impartial, face to face advice” at retirement, although this was toned down to “guidance” in the consultation document.
This has sparked controversy with many in the industry questioning how “guidance” can be free and impartial. Otto Thoresen, director general of the Association of British Insurers, recently told MPs that this will be borne by both the industry and consumers.
The Napf survey found 29 per cent of consumers would like to receive “face to face, independent advice”, but respondents from lower income households were far less certain about whether they would use a guidance service at all.
On a positive note 28 per cent of people are likely to start saving or will save more into a pension, with only 3 per cent stating they were less likely to save into a pension or stop saving completely.
Napf found young people to be the most likely group to save into a pension in the wake of the Budget. Lower income respondents also said they felt more attracted to pension saving, which could imply that they have been incentivised by the option of having more flexible access.
The proposed reforms introduce greater flexibility around how people can access their pension savings at retirement and 61 per cent of Napf survey respondents said they feel capable of deciding what to do with their pension savings.
The Budget reforms have faced some criticism from cynics who have said that the government will benefit in the short-term due to people withdrawing their pension and spending it, marking a marginal rate of tax and indirect tax windfall for the government.
In March, prime minister David Cameron used a speech to Saga members to blast critics of the plans as being “deeply condescending” to savers.
He that concerns raised by some that pensioners will blow all of their funds when drawdown and annuity limits are removed cast savers as being “irresponsible”.