Are you aware of the pension freedoms? They may have come into force over a year ago, but it seems that many people are still unaware of their existence, which could mean that their retirement income is compromised – whereas awareness of them has been found to help boost savings pots.
Research from Aegon has found that 33% of respondents surveyed are still entirely unaware of the reforms that took place last April, while 32% have heard of the changes but admit to not knowing what they mean for their own savings. Conversely, awareness appears to have had a positive impact, with 15% of those who know about the changes saving more into their pension as a result – which could dramatically improve the retirement income you're able to achieve.
The reforms, which essentially gave consumers more choice over how to spend their pension pots, have been largely branded a success, and fears that retirees would blow their cash on Lamborghinis appear to have been unfounded. You can find out more about the pension freedoms here – together with the risks involved with each option – because it seems that being a bit more knowledgeable about the whole thing can seriously help.
A bigger pension pot could equal a bigger retirement income, but even so, there are still concerns about the whole thing. For example, 19% of Aegon's respondents were concerned that they'll outlive their pension fund if they take too much income, while 28% are unsure where they can get the right support, which further highlights the importance of being proactive and making sure you understand what's going on.
"Our research shows that people who know about the pension freedoms exhibit positive behaviours towards their retirement savings," said Steven Cameron, pensions director at Aegon. "[They're] saving more and actively taking steps to make a change or to review their retirement plans.
"While many may think that pension freedoms are just relevant to those at retirement, this simply isn't the case, and it's encouraging that even those who are 20, 30 and in some cases 40 years away from retirement are motivated, once they appreciate the freedoms, to improve their savings habits.
"The earlier individuals start planning seriously for their retirement, the more likely they are to achieve their aspirations. These findings set a clear challenge to both the industry and Government to take further steps to provide new, innovative ways of explaining what the pension freedoms are, and their potential impact on the retirement prospects of individuals."
However, we can't expect the Government to spoon-feed us everything. As Steven points out, "with freedom comes personal responsibility, and our industry also needs to innovate to find ways of protecting individuals from running out of pension funds when they still have many years of retirement to go".
The fear over more individuals opting for income drawdown rather than taking an annuity, for example, is that they may draw down too much too quickly, which could leave them struggling in later life if their pension pot runs dry. This is why it's so important to seek the right information, be it through Pension Wise, an independent adviser or (ideally) a combination of the two – if you arm yourself with the right knowledge, you could not only boost your pot, but be confident that that pot will last throughout your retirement.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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