AegonApr 5 2017

Millions save more as a result of pension freedoms

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Millions save more as a result of pension freedoms

Five and a half million people are saving more towards their retirement as a result of pension freedoms, research by Aegon has found.

The research, which coincided with the second anniversary of former chancellor George Osborne's Freedom and Choice reforms, found 14 per cent of working age people were saving more into a pension as a direct result of the changes.

In real terms, that meant 5.5 million people had upped their pension contributions since April 2015.

Aegon stated this increase was reflected in the average pension pot size, which currently stands at £50,000, up from £29,000 in April 2015.

The survey of more than 2,000 people also found 15 per cent had realised they needed to plan more for retirement, up from 10 per cent in April 2016.

The proportion of people engaging with an adviser on their plans for retirement, meanwhile, had almost doubled over the last 12 months.

Since pension freedoms, the portion of people with no retirement plan fell, from 50 per cent in April 2015 to 36 per cent now, with one in five people reviewing their plans in the past six months.

The 36 per cent of people that had never engaged with their pension gave various reasons for their lack of interest.

One in five people said they did not understand how to review their plans for retirement, while 15 per cent said the lack of online services or information prevented them from checking up on their pension savings.

One in 10 people, meanwhile, said the main barrier was the fear of seeing how little they have saved.

The research also found people were becoming more realistic about retirement income.

Before April 2015, people were on average hoping for a retirement income of £41,000 a year.

Now, people expect an average of £32,000 a year.

Aegon pointed out this was more than twice the average income in retirement of £15,392 a year.

Steven Cameron, pensions director at Aegon, said pension freedoms had put many more retirees "in the driver’s seat" for the first time.

"Two years on and all the signs point to the pension freedoms having paved the way for a smoother road to retirement.

"People have moved up a gear, saving more and becoming more engaged with their pensions.

"Crucially, the proportion of people speaking to an adviser about their retirement saving and income options is almost double what it was in April 2016. Giving retirees the freedom to do as they please with their money is having an impact not only on those who are taking advantage of that freedom today, but the trickle effect is positive down the generations," he said. 

However, he added there was still a long way to go, saying people would need to "accelerate their saving to reach their retirement destination and make the UK a nation of long term savers". 

james.fernyhough@ft.com