The pension freedoms announced in the last Budget represented the biggest shake-up in the pensions system since its introduction. However, according to the latest Quarterly Tracker by Aviva, the new pension possibilities have failed to excite the over-55s, with the majority saying that the new freedoms won't change their retirement plans.
In the survey, 78% of respondents claimed that they were well aware of the new pension freedoms; however, only 10% said that the new pension reforms coming into play next year will affect their retirement plans, which suggests that many don't fully understand the significance of the changes, particularly with regards to the tax benefits.
Aviva's Clive Bolton commented: "There is a huge amount of education work needed to ensure the over-55s are equipped to make the right decisions. There are implications that could leave retirees better or worse off at a time when they need to maximise their savings... it's really important that our industry and Government work together to ensure there is clarity."
Education on how not to abuse the new freedoms should also not be overlooked. Figures from Aviva's Real Retirement Report found that only 7% of over-55s worried about spending their pension savings too quickly – something that would be all too easy to do without the right advice - suggesting that retirees may need more guidance on how to handle their new-found freedoms as well as information on what the options are.
These results emerge as optimism among the over-55s reaches a post-recession high. Figures in Aviva's report showed that 43% of over-55s felt confident about the economy in the second quarter of this year – a confidence that is encouraging more of this demographic to increase their spending, something that could harm their retirement prospects.
The report found that personal expenditure among the over-55s has increased, with the typical monthly spend being £846 – up from £792 in the second quarter of 2013. Spending on credit cards, personal loans and overdrafts has also grown, with total debt for an over-55 now standing at £2,269, which is one of the highest figures seen in the report's lifetime. Money spent on luxuries, such as holidays, clothing and eating out, is also at a record high.
While spending increased, savings fell. In the second quarter of this year, over-55s typically put away only £46 a month, £2 less than they did in the first quarter.
This new-found confidence and subsequent spending spree is likely due to the strong growth in the property sector, with the majority of this age group either owning their own homes outright or with a mortgage. However, this means that they are more likely to be hit hard if prices reverse. "It is really important that the over-55s do not start spending or building up debt purely based on increasing property values, because that could all change," warned Clive Bolton.
To make sure you have enough funds to last out your golden years, preparation is key. If you are unsure about the new pension freedoms and what they could mean for you, or you hadn't originally intended to change your retirement plan, now is the time to gather as much information as you can.
To start off, why not read our retirement guides? They will give you some idea of what the changes are and what may benefit you. You can also check out our annuity tool to find out if this is an option you want to explore. The next step is to see a financial adviser, preferably an independent one, to get advice about how to maximise your retirement income so that you can enjoy the retirement you deserve.
Read our retirement guides
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