Pension reforms: is the UK still in the dark?

Published by Michael Trudeau on 09 March 2015.
Last updated on 09 March 2015

Pension on calculator

Huge swathes of the British population have no knowledge of the upcoming pension reforms, despite the new freedoms coming into play less than a month from today.

Several concurrent pieces of research have found that large chunks of respondents voice ignorance of the reforms.

Advice firm deVere Group found that almost two-thirds of surveyed savers aged 55 or over are unaware of the tax implications of withdrawing money under the new system, in particular that only the first 25% will be tax-free.

Under the new rules, if a saver does not take the tax-free 25% in a one-off withdrawal, only the first quarter of anything they draw from their pension savings will be tax-free. The balance will be taxed as income at their highest marginal rate.

Find the best pension funds available on your selected pension platform

Unaware

Nigel Green, founder and chief executive of deVere Group, says: "Therefore, you could be hit with a tax of 20, 40 or even 45% for the privilege of accessing your own retirement savings."

Meanwhile, retirement specialist LV= found in a separate piece of research that a third of over-50s do not understand what the new reforms mean, while 12% are completely unaware that any changes are on the horizon.

In a third piece of research, investment management firm Franklin Templeton found that almost 60% of respondents believe they do not know enough about the reforms to re-evaluate their options for income when they come to access their savings.

However, these results could be explained to some extent by the survey sample, which was of people aged 18 and over rather than 50-plus, as the other two pieces of research were.

Election deadline

Green adds: "The findings of [the deVere Group] poll highlight that the government has not done enough to educate and inform individuals about the real implications of this radical overhaul of Britain's pension landscape.

"It does rather feel that it has all been rushed through to hit an election deadline."

The sheer amount of uncertainty brings into question the capacity of the government's new Pension Wise initiative - a service offering free independent retirement guidance - to serve all who will need it.

Another notable finding was a discrepancy in both pot size and knowledge of the reforms between men and women, with LV= finding 36% of women had little or no knowledge of the pension reforms, compared to only 28% of men.

Meanwhile, women with workplace or private pensions reach retirement with pots of £107,000 on average compared to the £201,000 average for men. The Franklin Templeton research supported this, with 45% of women saying they had saved nothing for retirement compared with 35% of men.

This article was written for our sister website Money Observer

More About

Leave a comment