Despite the new ‘Pension Freedoms’ and an end the ‘death tax’ on pensions, it appears that many would-be retirees are far from excited about the changes.
Research conducted by ICM on behalf of Aviva, has shown that whilst 78% of people over the age of 55, who have yet to retire, are aware of the pension changes, many feel they won’t be affected:
- 55% of those surveyed said the changes won’t affect them
- 54% won’t be altering their plans as a result of the new freedoms
- Just 1 in 10 said the changes would affect their plans
It’s clear that with so few people saying their plans will change, that an Annuity will remain a popular option for many. Indeed, despite many sensationalist newspaper reports an Annuity will remain the right option for many people, especially those in poor health, who want a guaranteed income for the rest of their life, or who can’t afford to see their income fall.
An opportunity missed?
It’s clear that most pre-retirees are aware of the forthcoming changes. But with just 10% suggesting their plans will change, many experts are now question whether people understand the changes and the new opportunities available to them.
Of those people who say their plans will change:
- 59% say they are likely to take some or all of their pension as soon as they possibly can
- 34% may take some of their pension pot as a lump sum
- 14% will take a lump sum to pay off their mortgage
Income or lump sum
Since the new rules were announced there has been mounting concern that pensioners will simply take their pension pot as a lump sum, preferring the ‘upfront’ cash rather than a steady income for life.
However, the survey has found that this may not be the case, with 49% saying they did not see any advantage in taking their pension pot as a lump sum. Furthermore, 52% of people surveyed believe they will have sufficient income in retirement.
Commenting on the survey Aviva’s Managing Director, retirement solutions, Clive Bolton, said:
“There is a huge amount of education work needed to ensure the over-55s are equipped to make the right decisions when the freedom and choice changes take effect in April next year,” said Mr Bolton.
“It’s great that awareness about the changes is high, but people really need to understand that these changes do more than just open up choice – they also change the rules and tax implications on how people use their savings. And with the latest announcement on pension tax changes, the picture for consumers is even more complex.
“It is not simply a choice between taking savings early or choosing a retirement product, there are implications that could leave retirees better or worse off at a time when they need to maximise their savings.
“From our own work with consumers in some recent retirement seminars, we know there is a real thirst for more information about these changes, and it’s really important that in the run up to April our industry and government work together to ensure there is clarity for consumers.” (Source: Aviva)
Are you missing an opportunity?
The new rules will certainly present pensioners with a range of opportunities which were previously unavailable.
But the new freedoms need to be used wisely, running out of money, with no safety net from the Government, could be an expensive mistake.
If you would like to know more about the new rules and how they can benefit you our team of advisers are here to help you. Call on of our independent experts today on 0115 933 8433, alternatively email email@example.com