UK workers left vulnerable and in the dark about new pension reforms
A startling lack of public awareness about the new pension reforms and a concern that they may exacerbate irresponsible spending, pensioner vulnerability and fraud is revealed by new Towers Watson study
Nearly two thirds of British workers (62%) are either totally oblivious of the Government’s recent pension freedom laws or have scant understanding of how they are affected, according to a major new survey of 5,000 UK employees by Towers Watson.
The findings, published today, also uncover a major worry among those who have a better understanding of the reforms, which give people over the age of 55 access to as much of their defined contributions pension scheme as they choose. Nearly half of those surveyed (47%) believe pensioners will be vulnerable later in life, some (42%) think the reforms will promote irresponsible spending and around a quarter (26%) are concerned that the changes will increase the possibility of fraud.
The survey also exposes a worrying lack of planning for old age among the UK’s working population. While over three quarters (77%) of people surveyed acknowledge that retirement planning is a topic that should be discussed more often, 56% admit they rarely discuss it and only 38% have had a conversation with anyone about it in the last year. The survey also found that, in general, putting money aside as savings is only a financial priority for a third (34%) of employees.
Fiona Matthews, Managing Director of LifeSight, Towers Watson’s master trust, stated: “These findings show that people hardly ever discuss savings for pensions and retirement plans and, perhaps partly as a consequence, many UK workers are poorly informed about the Government’s recent pension reforms. This information deficit has the potential to store up major problems in the future, especially as our ageing population means there will be 15.5 million pensioners in the UK by 2030.
“It is not surprising that this lack of interest in discussing retirement planning has caused many to worry they haven’t saved enough for retirement. This is supported by the research which shows that employees are saving, on average, £1,640 less of their salary annually than they think they should. (9.5% of salary vs. 14.3%) – this significant saving shortfall could have major ramifications for people’s quality of life in retirement.
“However, there are signs that young people in particular are keen to address the retirement savings challenge by having more open discussions and increasing their level of understanding. This is a positive step as, more than ever, the onus is now on individuals to make sure they are saving for later life in order to take advantage of the new choices and freedoms that are available.”
Other findings include:
- People are perceived to have the most financial burden in their 30s, with the most freedom in their 20s and 60s
- 18-24 year olds are the group most interested in saving for retirement; despite the fact that many in this age group are saddled with growing levels of debt from studying, such as student loans
- Over a quarter of respondents (28%) are more concerned with getting wrinkles and going grey than saving for retirement
- Simon Cowell (20%) is the celebrity that people are most likely to take financial advice from; Sarah Ferguson is the least likely to be asked (with just 1%)
Matthews continues: “Despite limited knowledge about the pension changes, people are engaged in their financial future to want to find out more. We strongly encourage people to reach out to their employers or pension providers to ask questions, find out about their options and get guidance on what they need to do at this stage in their life to make sure they are well prepared for retirement.”