Consumers are turning on to the importance of retirement planning, following reforms that allow savers to access all of their pension pot.
According to the latest Nest Insight report from the government-run pension scheme, support for workplace pensions, and more specifically auto-enrolment, has grown to 77% over the past year up from 68% in 2013. Consumers ranked saving for retirement as third in their list of financial priorities, behind paying for holidays and saving for a rainy day.
Auto-enrolment, which was two years old in October, will mean that all businesses regardless of their size must offer a pension plan by 2018, and automatically enrol their employees.
Employers will match your contributions in a workplace pension up to a pre-agreed cap, and the Government will top it up with income tax relief – more than doubling your savings every month.
The boost in popularity for workplace pensions has been fuelled by reforms announced in last March’s Budget by George Osborne. The reforms allow pension savers access to the entire of their accrued pot from pensionable age, and do away with the requirement to buy an annuity.
This freedom to spend your pension savings as you wish has particularly appealed to younger savers aged between 22 and 30, who said that as a result of the changes they would be thinking about their retirement plans sooner. Across the board, a third of workers said they planned to up their pension contributions as a result of the reforms.
Tim Jones, CEO of NEST Corporation said that auto-enrolment had helped make saving for later life “the new normal”.
“It is hugely positive to see that pensions are becoming embedded as a national priority. Until recently, millions of people were not saving for retirement,” he said.
“Auto-enrolment and now the new pension freedoms have changed all this – reform is leading to a pension revolution. Five million more people are now saving for their future and support for auto enrolment continues to grow, even among those who have so far opted out. It shows just how far we have come.”
However, the Nest report did reveal that more than half respondents were unaware that the reforms had been announced and how the changes would affect their retirement plans.