Over-55s Saving More for Retirement Thanks to Pension Freedoms

Over-55s are working longer and saving into their retirement funds, new research from Prudential has found.

Three years after the introduction of new Pension Freedoms, 11 per cent of all working people over the age of 55 have started saving into a pension for the first time, encouraged their partner to save more, increased pension contributions, or restarted pension saving.

A further one in seven (14 per cent) are making more effort to learn about retirement savings.

However, more than one in three (42 per cent) are concerned about running out of money during retirement while 41 per cent worry about paying for long-term care.

And almost two thirds (64 per cent) of over-55s say they are still confused by the Pension Freedom regulations, with 82 per cent saying that they don’t want any further Government changes to pension rules.

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“The reality of Pension Freedoms is hitting home as consumers begin to understand that they are responsible for ensuring they have enough money to last throughout their retirement,” Vince Smith-Hughes, a retirement income expert at Prudential.

“The fear that they might run out of money is forcing them to take a long, hard look at how much they should be saving to ensure they have the retirement they want.

“Pension Freedoms have in many cases shifted the responsibility for making a pension fund last throughout retirement directly onto consumers. Previously most people bought an annuity to guarantee an income for the rest of their lives. Now they can drawdown as much money as they like but the risk is that they run out of money in their lifetime.

“The fact that many over-55s are preparing to work longer and save more highlights that they recognise this risk and a responding in a rational and responsible way. The best thing most people can do to ensure a comfortable retirement is to take financial advice, while also trying to save as much as they can into a pension, especially a company based scheme where they’ll immediately take advantage of contributions from their employer.”

The Pension Freedoms rules came into effect in April 2015, and allow anyone over the age of 55 to withdraw their entire pension as a lump sum.

No tax is paid on the first 25 per cent withdrawn, and the remainder is subject to the lower rate of income tax.

 

Kathryn Gaw

Kathryn Gaw is a financial journalist based in Belfast, Northern Ireland. She has been writing about personal finance and investment trends for more than a decade, and her work has been featured in the Financial Times, City A.M., the Press Association, and The Irish Independent, among many other publications.