More of us are saving, more of us are saving enough, and more of us are shopping around before investing our money at retirement.
These were the findings of Scottish Widows in their ‘Retirement Report 2015’ and of the Association of British Insurers (ABI) in a survey of saver activity since new pension freedoms were introduced in April.
Scottish Widows says over half (56%) of over-30s are saving enough for their retirement, which is the highest level in 10 years.
More importantly, those who are saving are saving enough: the average proportion of earnings being saved for retirement has now reached Scottish Widows’ recommended levels of 12%, including employer contributions.
Further good news from the ABI: brand new figures from them prove that, as we pass the first 100 days since new pension freedoms came into effect on April 6th, savers have rallied with joy to take advantage of their new options.
In April and May, savers took out over £1bn from their pensions, and the average pot taken was £15,500.
We show high awareness that, since April, we can now invest in products that allow us to ‘draw down’ slices of our pension cash, similar to taking out money from an Isa.
In April and May, over half of the withdrawals went for these income drawdown products, rather than buying an annuity. This is a real ‘sea change’ since 2012, when annuities accounted for 90% of total sales.
More people are finally realising that it is crucial to shop around for the best deal, rather than taking the first offer you get, which usually comes from your own pension company.
Since April, the ABI says that 45% of annuity sales were to people who switched away from their own pension company, while over half (52%) of sales of income drawdown products were to people who switched.
This article does not constitute financial advice. Brian Kennedy is a chartered independent financial adviser within Priory Financial Planning Ltd., and can be contacted on 028 9042 5025 or firstname.lastname@example.org. Priory Financial Planning Ltd is an Appointed Representative of TenetConnect Ltd which is authorised and regulated by the Financial Conduct Authority (FCA)