Over 55s unmoved by pension reforms

The majority of people aged over 55 do not think the government’s pension reforms will impact them, according to a report by Aviva.

From April 2015, retirees will have greater freedom to choose how they access their pension savings. This includes being able to take lump sums without incurring a 55% tax charge on withdrawals above the 25% tax-free limit. Instead, withdrawals will be taxed at the person’s marginal rate of income tax.

Aviva found that 55% of over 55s say they are unaffected by the new pension freedoms while 54% said they have not changed their retirement plans since they were announced.

The survey of more than 1,200 over 55s found:

  • just 1 in 10 said the changes have impacted their plans. Of these:
    • 59% are likely to take some or all their pot as soon as they can
    • 34% might take some as a lump sum to fund their retirement
  • 14% said it could be useful to take a lump sum to pay off the mortgage
  • 49% of all over 55s do not see an advantage in accessing their pension as a lump sum.

Clive Bolton, managing director of retirement solutions at Aviva, said:

“It’s great that awareness about the changes is high, but people really need to understand that these changes do more than just open up choice – they also change the rules and tax implications on how people use their savings. And with the latest announcement on pension tax changes, the picture for consumers is even more complex.

“It is not simply a choice between taking savings early or choosing a retirement product, there are implications that could leave retirees better or worse off at a time when they need to maximise their savings.”