It’s been just over two years since the introduction of some of the most radical reforms to UK pensions in a generation, the pension freedoms.
New research from Aegon has found that 13% of working age people in Scotland are saving more into their pension as a direct result: equating to some 440,000 people in Scotland contributing more to a private or workplace pension because of the reforms.
This increased savings level is not the only positive impact of the pension’s freedoms. 10% of people in Scotland have realised they need to plan more for retirement and the proportion of people in Scotland engaging with an adviser has more than doubled in the last 12 months.
This growing engagement is reflected by improvements in people’s financial planning. In April 2015, 51% of Scots had taken no steps to review their retirement plans, but positively this has fallen to just a third (31%). In fact, over a quarter (26%) of people in Scotland have reviewed their plans in the past six months alone, showing greater levels of engagement than the UK as a whole (22%).
As people become more active in reviewing the status of their savings, Scotland’s overall aspirations for retirement income are becoming more realistic. The average annual income the Scottish population would like in retirement is £30,000, a fall from the £34,000 people were hoping for this time last year and lower again than the £40,000 in April 2015, when the pension freedoms were first introduced. While these incomes are still some way above the £22,900 average income in Scotland, and a good deal more than the average pensioner income, it’s encouraging that aspirations are moving in the right direction.
Yet, despite the positive signs, nearly a third (31%) of people have never engaged with their pension savings. The reasons are varied, one in five (21%) people in Scotland claim they simply don’t understand how to review their plans for retirement, 19% of people say the lack of online services or information prevents them from checking up on their pension savings and for one in twelve (8%) the main barrier is the fear of seeing how little they have saved.
Steven Cameron, Pensions Director at Aegon said: “Two years on and all the signs point to the pension freedoms having paved the way for a smoother road to retirement for Scottish pension savers. People are contributing more to their pensions, engagement is on the up, people are becoming more realistic about their future retirement income and they are taking action to achieve it. It seems that giving retirees the freedom to do as they please with their money is having an impact not only on those who are taking advantage of that freedom today, but the trickle effect is positive down the generations.
“However, there’s still a long way to go. People will need to accelerate their saving if they truly want to take the retirement ‘high road’. A third of the working age population in Scotland have never taken any action that affects their plans for retirement and these people must be encouraged to engage and save more, or face a very uncertain future. One of the key barriers identified by people in Scotland is the lack of online tools and information. Check with your pension scheme or provider to make sure you make full use of what’s available. Looking ahead, the pension dashboards are due to be introduced in 2019, which will help this by enabling people to see all their pension savings in one place.”