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The Actuary The magazine of the Institute & Faculty of Actuaries

Over 5.5 million people saving more as a result of pension freedoms

Two years on since pension freedoms were introduced in the UK, 14% of working age people are saving more as a direct result, according to research by Aegon.

Increased saving will have "a trickle effect" down the generations ©iStock
Increased saving will have "a trickle effect" down the generations ©iStock

This equates to 5.5 million more individuals contributing to a private or workplace pension because of the reforms, with the average retirement pot now at £50,000, compared with £29,000 in April 2015.

It was also found that the freedoms have prompted an additional 5% of people to recognise the need to plan for retirement, while the number engaging with advisors doubled in the last 12 months.

Aegon pensions director, Steven Cameron, said: “Two years on and all the signs point to the pension freedoms having paved the way for a smoother road to retirement.

“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.”

The pension freedoms were introduced on 6 April 2015, enabling consumers at a minimum pension age to take savings as cash, buy an annuity, use drawdown without any limits applied, or a combination of all three.

The Aegon research shows that, at that time, half the UK population had taken no steps to review their retirement plans, but this has now fallen by 15% to just over a third.

In addition, aspirations are becoming more realistic, with the average desired retirement income down from the £38,000 recorded in 2016, and £41,000 in 2015, to £32,000 today.

However, despite the positive signs, over a third of people have never engaged with their pension savings, with 22% not knowing how to, 15% citing a lack of online information services, and 12% too fearful of seeing how little they have saved.

“There’s still a long way to go. People will need to accelerate their saving to reach their retirement destination and make the UK a nation of long-term savers,” Cameron continued.

“The challenge is to engage people early enough to give them choice about how they finance their retirement.”

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