42% of savers say pension changes have made them ‘switch off’

Four in ten pension savers say the constant changes to pensions has led to them switching off from the topic, research from Prudential has found.

The survey of over 850 people over the age of 55 found that, two years on from the launch of the pension freedoms, more than three-quarters (77 per cent) want an end to any further changes to pension rules. Two out of three (67 per cent) say they are confused by the reforms launched in April 2015.

The confusion is evident in the tax the Treasury has raised in relation to the pension freedoms, Prudential says. It was initially estimated that the changes would mean a total of £900m being paid in the tax years 2015-16 and 2016. In fact, a total of £2.6bn in tax is now expected to be paid.

Furthermore, the new freedoms are having an impact in other ways, with 9 per cent of over-55s stating that they have made changes to their retirement as a result of the reforms. Interest in receiving financial advice has been increasing with a fifth of retirement savers (21 per cent) saying they are taking financial advice, while a further 9 per cent either planning to or have done so for the first time.

Those surveyed believe that additional support for savers in terms of advice and guidance would encourage them to save more – 36 per cent say walk-in financial guidance centres would boost saving while nearly a third (31 per cent) would back a tax break for savers taking face-to-face professional financial advice.

However, concerns that pension rules may change again in the future persist, with 81 per cent of over-55s worried that the State Pension might be reduced and 57 per cent concerned it will be abolished. Nearly two out of three (63 per cent) also believe that tax relief on pension contributions will be reduced at some time in the future.

Commenting, Prudential retirement income expert Vince Smith-Hughes said: “Nearly 550,000 people have accessed more than £9.2bn in funds since the launch of pension freedoms, demonstrating that there is popular demand for the increased flexibility brought about by the reforms. However, two years on from the introduction of the new rules there is also widespread confusion with two out of three over-55s admitting they don’t fully understand the reforms. This lack of understanding may be a contributing factor in pension-related tax paid to the Treasury being higher than originally expected.

“That underlines the importance of advice and guidance in ensuring that the pension freedoms are a long-term success and it is encouraging that many savers recognise how advice can help them to make the most of their retirement pot. The pension freedoms provide a framework of rules but it is down to individuals to seek help where needed to enable them to plan how to meet their financial goals. Saving as much as possible as early as possible during your working life is the first step towards having sufficient income for a happy retirement.”

The Prudential research found that over-55s would value support from their employers in tackling retirement planning. About 21 per cent say access to financial advice at work would help them save more, while 20 per cent would back having retirement planning seminars at work.

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