Pensions Freedoms one year on – Over 55s divided on whether they are a good thing

The Institute and Faculty of Actuaries (IFoA) commissioned research of the British population over 55 on their views of the pensions freedoms for the first anniversary of the reforms coming into force on 6th April.

• 44% of respondents view freedoms as a good thing versus 29% who say they are a bad thing
• 30% of respondents do not understand the difference between government provided ‘guidance’ and paid for financial advice
• Only 21% believe their pensions income is enough to last throughout their retirement

The research, conducted by YouGov, found that 44% of respondents viewed the pensions freedoms as a good thing, however nearly one third (29%) reported that they viewed the changes as a bad thing – leaving the nation split on the benefit of these significant changes.  For those over 65, positive opinion of the reforms dropped to 37%.

Encouragingly, 73% of respondents reported being aware of the new pensions freedom rules, which is a positive result for the Government’s awareness raising initiatives around the reforms.  However, awareness was stronger amongst those of a higher social grade, reaching 80%, versus 62%.

Only 5% of total respondents reported accessing their DC pension savings since the freedoms were introduced.  The top four ways they accessed their savings were: 65% took a tax free lump sum, 17% entered into an income drawdown arrangement, 6% took the full pot, and only 5% bought an annuity.

Positively, 55% reported understanding the difference between the ‘guidance’ that is provided by the Government’s Pension Wise service and paid for regulated financial ‘advice’.  However, 30% did not understand the difference, showing there is more work to do by the Government and industry in making sure individuals understand.

Three quarters (75%) of respondents reported feeling confident in making decisions regarding their retirement savings versus a quarter of people did not feel confident.  Those who reported feeling unconfident rose to 30% for women and those aged 55-64, and to a third (33%) for those identified as working class.

Worryingly, only 21% felt that their defined contribution pot and state pension combined would be enough to live on for the rest of their life.

Fiona Morrison, President of the IFoA, comments,

“The first anniversary of the pensions freedoms gave us the opportunity to ask those over 55 what they thought of the changes and whether they made a positive impact on their views of their retirement income.  Opinion is split on whether the freedoms are a good thing or a bad thing, with those over 65 less positive.

“There is some good news in the findings, with a high proportion of respondents being aware of the freedoms.  However this knowledge doesn’t appear to follow through to their understanding of the difference between the guidance that is provided through the Government’s Pension Wise service and regulated financial advice.

“The most worrying finding is that only 21% of respondents believe that their combined personal and State pensions will be enough to last for the rest of their lives.  This should be a red flag to policy makers who have been looking at how to incentivise people to save for their retirement.  It clearly shows more needs to be done here to reduce the risk that people use up their savings too quickly in retirement and then have to fall back on the State for support.”

The full commssioned research is available to download here.

ENDS

Editorial notes:

All figures, unless otherwise stated, are from YouGov Plc.  Fieldwork was undertaken between 1st - 3rd March 2016.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+), of which 1408 were over 55.

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest. 

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