The pension reforms announced in the March Budget are more likely to benefit healthy and wealthy men, an Institute for Fiscal Studies analysis has suggested
The independent think-tank examined the likely impact of the changes on 2,000 people drawn from the English Longitudinal Study of Ageing, which began in 2010. Researchers found that around one third of people in the 55-59 age group had funds saved in defined contribution pensions and so would enjoy the additional flexibilities announced in the Budget.
Of this group, 60% were men. They were also more likely to be better educated, in better health, expected to live longer, financially stable and homeowners.
The amount of money held in DC pots varied. Half of the people in the age group had less than £53,000 saved, but one-in-four of them held more than £116,000.
However, DC pension wealth was only one component of the household wealth portfolio for this group, the IFS found. For around half of them, DC wealth accounts for less than 10% of their total household wealth, it noted. For just over half, DC wealth was their only form of private pension, but nearly three-in-ten actually held more in DB pensions than in DC funds.
The IFS stated: 'Overall the group who might get more flexibility has higher average wealth than those unlikely to be affected by the reforms: we estimate that those getting more flexibility have a median wealth of £730,000 compared to £590,000 among those unaffected.
'These characteristics suggest that they might be relatively well-placed to receive and act appropriately upon, information, guidance and advice that are given over how to manage their own finances.
'However, the fact that they are in relatively good health and expect to have a greater than average chance of living to older ages may complicate their retirement planning and potentially increase the costs of making an inappropriate decision.'
Additionally, the IFS noted that a 'significant fraction' of people would be totally unaffected by the pension reforms. This was either because they had no money in DC funds or because they were already entitled for a 'trivial' lump sum payment or flexible drawdown.
The IFS estimated that about half of men and two-thirds of women in the study sample of 2,000 people had no money in DC pensions.
Those with very small DC pots and those who already had £20,000 of secure annual income from state pensions, DB pensions and already annuitised DC pensions were unlikely to be affected by the reforms.