Pension freedoms edge UK population closer to being retire ready

However, 92% aren’t on track for the retirement they want and fraud poses a risk as one in five receive cold calls

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  • One in six (16%) people have decided to save more into their pension as a direct result of the pension freedoms
  • The UK’s average Readiness score has risen from 47 to 49 since May 2015
  • While people remain unrealistic, the gap between the income people want in retirement and the actual income they are on track for has narrowed by £2,100
  • However, one in five (19%) have received cold calls offering a free pension review or pension investment opportunities, often incorrectly suggesting that pensions can be accessed before 55.

8% of the UK population are on track for the retirement income they aspire to according to new research from Aegon UK, a 14% increase from May 2015. The pension freedoms have caused an immediate uplift, with one in six (16%) people saving more into their pension as a direct result of the reforms, with average contributions up £204 to £470 a month. 

Aegon’s fourth UK Readiness Report, the latest in a series of reports that looks at attitudes toward retirement, finds that the pension freedoms introduced in April are having a positive influence on the UK’s financial behavior. In the last six months 22% of people have checked the performance of their retirement savings, and a fifth (20%) have taken steps to review or affect their plans for retirement, up from 19% and 18% in May 2015. 

As a consequence, the nation’s readiness score has risen from 47 to 49 in the last six months. The UK still hopes to retire aged 63, despite planned increases to the state pension age. Since May 2015, there has been an increase in the income people want in retirement to £43,000, a sum that would require a savings pot of more than £1m, higher than the new pension lifetime allowance. While people remain unrealistic, the gap between the UK’s desired and likely retirement income [£14,500] has actually narrowed by £2,100 over the past six months.

Dangers of fraud 

While pension freedoms have brought about improvements to the UK’s readiness for retirement, fears that the reforms have also opened the door for fraudsters are being vindicated. 19% of people in the UK have received a cold call offering a free pension review or pension investment opportunity, 15% have received an offer suggesting they can access their pension pot before 55, and 11% have received a text message offering a free pension review or pension investment opportunity. These are worryingly high numbers, especially as a quarter (25%) of the UK public are not aware that the reforms increase the likelihood of pension scams.

Aegon’s top tips for avoiding fraud

  1. Be wary. If it seems too good to be true, it probably is.
  2. Ignore / delete emails and texts.
  3. Never give out personal information to a cold caller – just hang up.
  4. Never be rushed into making a quick decision.
  5. Don’t let anyone in to your home unless you’re sure they are genuine.
  6. Use a regulated adviser to make sure you're protected. Find one at www.unbiased.co.uk. Alternatively contact your pension provider if you believe you’ve been approached with a suspicious offer
  7. Read the documents carefully. Don’t sign anything unless you fully understand what you’re getting into. You may inadvertently sign your pension away.
  8. Carry out research. Check out the company or named individuals online.
  9. Beware of the tax implications. For example, if you transfer your pensions overseas and you live in the UK, you may need to pay a 55% tax charge, in addition to any other fees.
  10. Tell your pension provider or adviser if you have any concerns. Report any suspicions to the FCA, fca.org.uk and Action Fraud at actionfraud.police.uk

Mark Till, Managing Director, Aegon UK Direct said: “While an additional 400,000 people are on track for the retirement they want, 92% are still falling short of their retirement targets. This is a small improvement but we’re optimistic the pension freedoms have reignited people’s interest in their pension and that we should see greater engagement in the years to come. 

“The pension freedoms have focused primarily on giving those approaching retirement more control over their savings, something that we wholeheartedly support. However, whilst we are seeing initial steps in the right direction, it is vital that we continue to support those starting out or still on their savings journey. 

“Industry reforms such as auto-enrolment and pension freedoms are working, and they are already having a positive effect on saving behaviours, with more people engaged, and ready for the retirement they want. 

“Prior to the freedoms the industry braced itself for a rise in sophisticated scams and sadly, the fears have not been misplaced. It’s alarming to see that almost 8 million people in the UK have received a cold call offering a free pension review or pension investment opportunity. With this number of people contacted more financial education and awareness is vital. Government and the pensions industry need to take collective responsibility to ensure the UK public are adequately protected.

“The way forward for the government and industry alike is digital engagement. We now have a number of online tools, like Aegon’s own Retiready, that could, and should help people across a range of age groups engage with their pension savings in an effective way, and continue to support the UK in getting ready for the retirement.”