With pensions freedoms now in effect, will Britain see a revolution in savings?
Carlton Hood, customer director at Old Mutual Wealth, says Yes.
The pension freedoms have done two things; they have put pensions in the public consciousness like never before, and given people the opportunity to take complete responsibility for how they use their own wealth. Eighty-one per cent of consumers have told us they are aware of the key reforms, and I doubt engagement with savings has ever been that high. People are starting to view pensions as their money, rather than a black box savings vehicle with strict rules around how you can access those savings. The reforms also make pensions a much more appealing way to pass on wealth to the next generation. So your pension is now a much more powerful tool than a simple pool of assets used to fund retirement. People are increasingly viewing retirement as an exciting new phase of their life, not a winding-down in old age, and the pension freedoms can help them realise their later-life ambitions. However, these freedoms are not risk-free and people should seek advice.
Annabelle Williams, deputy money editor at Morning Wire, says No.
These pension changes are an important step towards creating a nation of savers able to take responsibility for their own financial security. But despite the hubbub in the industry, there is a startling level of ignorance among ordinary people. Pensions are labyrinthine in their complexity, and greater education is needed before the revolution begins. The fact is, people simply aren’t saving enough. But for workers today, pensions are being pushed down the priority list by factors which were not a concern for previous generations. Paying into a pension is difficult for many Londoners, burdened with high housing, travel and living costs. The huge deposits now required to buy a first home mean cash that should be put into a pension is put aside for a downpayment instead, while the spectre of the student loan continues to haunt young workers into their 30s. Britons need to save, and the pensions freedoms will help – but we are a long way from a savings revolution.