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  • April 2014
04

Budget reforms sparks pensions saving enthusiasm, NAPF poll finds

Open-access content Tuesday 29th April 2014

Over a quarter of workers would now start saving or save more into a pension following the reforms announced in the Budget, according to a poll by the National Association of Pension Funds

Only 3% out of the 1,000 employed respondents to its survey said they were less likely to save in a pension or stop saving completely. 

NAPF's Spring workplace pension survey found young people aged 18-24 to be the most likely (54%) group to save into a pension in the wake of the Budget. And 42% of lower earners - people with a combined household income of less than £14,000 a year - said they were now more attracted to pension saving.

The survey also highlighted that a majority (61%) of respondents felt capable of deciding what to do with their pension savings following proposed reforms to introduce greater flexibility around how people could access their pension savings at retirement. 

Over half (58%) displayed a prudent attitude towards retirement income, saying they would prefer to receive a regular income for life rather than risk their money running out, while a quarter (24%) said they would take all of their pension savings in cash because they had other sources of income. 

Almost 20% said they would take all their savings as a lump sum irrespective of whether they had other savings elsewhere. 

NAPF cautioned that the number of pensioners choosing this route could be significantly higher than the government anticipates, with subsequent ramifications on retirement income and state-pension reliance. 

Additionally, just under half (47%) said they were worried their pension would run out and that they would need to rely on the state for their retirement income.

NAPF chief executive Joanne Segars said: 'We do need to make sure people are fully aware of the consequences of taking their pension savings in one go if they do not have any alternative source of income.'

On the receipt of guidance or advice, 14% said they would not need help, while 29% opted for face-to-face independent advice. Fewer than half (43%) of respondents said they were prepared to contribute towards the cost of independent financial advice. No respondent was prepared to pay more than £500 and only 3% were prepared to more than £200. 

Segars continued: 'Greater flexibility brings greater responsibilities and the decisions people will make when they reach retirement are undoubtedly complex. The government has said that people should receive free face-to-face guidance at the point of retirement, but it is not clear this service will be delivered or who should be responsible for it.'

Elsewhere in the survey, less than a quarter believe they would need to save more than £150,000 to provide for a comfortable retirement. But, around 28% said they had no idea how much they needed to save.

This article appeared in our April 2014 issue of The Actuary.
Click here to view this issue
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