New research reveals one in eight (13 percent) of those in their 30s and 40s are putting away more money for their retirement as a result of the pension freedom reforms.
Despite the direct impact of the freedoms only affecting over 55s at or in retirement, the reforms have led to a halo effect that is reaching even younger generations. Quizzed about the changes, nearly nine out of ten (87 percent) people in their 30s and 40s say they are aware of the reforms with 11 percent saying they have started saving more into a pension as a result. A further 4 percent state the reforms have inspired them to begin contributing to a pension. Positively, nearly half (49 percent) of those with a good understanding believe they will benefit from the freedoms, although 72 percent of those aware of the rules and regulations believe they will change again before they reach retirement.
Yet, responses did highlight that further work needs to be done when it comes to encouraging saving amongst this generation with two in five (42 percent) of cohorts in their 30s and 40s reporting that they are not currently saving towards their retirement. Richard Parkin, Head of Retirement at Fidelity Worldwide Investment, comments:“It’s great that the halo effect of the pension freedoms is now cascading down the generations as we see younger people starting to take a more proactive interest in their retirement savings. Indeed, the earlier you start, the better in terms of achieving the retirement you want.
“There is, however, an important point to flag – it’s great that those coming through feel more positive but the key is to save as much as you can, as early as possible. The older generation have a higher level of defined benefit pensions that those coming behind just won’t have. Pension freedom could be a hollow promise for them. Not only could they not be able to afford to use their retirement savings flexibly but they may simply not have enough to live on. We must not mislead people into thinking that the freedom enjoyed by today's retirees is something they can get with relative ease and with no real extra saving above what they are doing.”