Pensions: New rules encourage more people to plan for their retirement


Pensions: New rules encourage more people to plan for their retirementNew research has found that the changes to pensions announced in the Budget, will mean more people paying into a pension and planning for their retirement.

In his last Budget, George Osborne announced pensions would get unprecedented access to their pension when they retire.

The study, conducted this month by the National Association of Pension Funds (NAPF) found that:


  • 28% of people are now more likely to start saving, or put more away each month, into a pension
  • This figure leaps to 54% amongst younger workers aged 18 – 24
  • 42% of lower earners, with a household income of less than £14,000 per year, said they would be more inclined to saving into a pension
  • Just 3% of people said they would be less likely to pay into a pension as a result of the changes

The figures are encouraging, especially at a time when millions of workers are being automatically enrolled into workplace pensions. Whilst workers can opt-out after being automatically enrolled, to do so will lose valuable employer contributions and will leave them worse off in retirement.

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How will people take their pension?

The new proposals will give pensioners greater access to their pension pot; after April next year, there will be no cap on the level of income, or lump sum, a pensioner can take from their pension.

This has led to fears that some pensioners will simply strip out as much money as they can from their pension pot, simply to spend it frivolously and then fall back on the state. However, the research from NAPF would seem to suggest otherwise:

  • 58% of people said they would prefer to receive a regular income for life and not risk running out of money
  • 47% of people are worried their pension will run out and they will have to reply on the state
  • 24% said they expect to take the money in cash and will use other sources of income to meet their household expenditure
  • Whether they had additional savings or not around 1 in 5 people (19%) said they would take the lump sum

The figures will go some way to dispel the myth that Annuities, which guarantee the pension will never run out of money, are dead and will no longer be used by pensioners.

There are many circumstances when an Annuity is still the right option at retirement. Although it is clear many people, probably those with smaller pension pots, will take advantage of the new rules to withdraw all the money as one lump sum.

Commenting on the research, Joanne Segars, NAPF Chief Executive, said:  “It is encouraging that following the Budget proposals more than a quarter of people are more likely to save into a pension, with younger people and those from lower income households especially motivated to start saving. Interestingly, more than half of those surveyed had a prudent attitude towards retirement income. However, we do need to make sure people are fully aware of the consequences of taking all their pension savings in one go if they do not have any alternative sources of income.” (Source: NAPF)

DIY or advice?

The new rules, assuming they are left unchanged when finally implemented, will give people far greater choice at retirement.

This wider range of choices and options will undoubtedly lead to greater complexity and the potential for pensioners to make mistakes, which could have serious repercussions for their retirement income.

The NAPF survey revealed that just 14% of people thought they could take the ‘DIY’ approach and go it alone at retirement without the need for guidance or advice.

The most popular option was for independent face to face advice, with 29% of people indicating this was their preference.

Are you confused by the new rules? Do you need help making the right decision?

Our team of Independent Financial Advisers are experienced in developing retirement income strategies for clients the length and breadth of the UK.

If you are approaching retirement and would like advice on your options call one of our IFAs  today on 0115 933 8433, alternatively enquire online  or email