Ahead of the deadline for responses to the Work and Pensions Select Committee inquiry into how pension freedoms are working, new research from LV= explores how retirees are coping two and a half years on from the reforms.
The figures – released as part of LV=’s tenth annual State of Retirement report – indicate that, far from winding down, retirees are making the most of their time, with signs that pension freedoms have made people even more likely to feel this way. Half (49%) of retirees now say they view their post-work years as an exciting phase of life, with many using their free time to learn, see and experience new things.
Nearly two thirds (64%) of people who retired since April 2015 say stopping work has opened up new opportunities, with one in five (20%) having decided to learn new skills and more than half (55%) devoting more time to their hobbies. In addition, those who retired since the pension freedoms are being more adventurous with their holidays. Nearly half (46%) are holidaying in places they’ve never been to before, compared to 39% of people who retired before the freedoms were introduced, with the Caribbean (18% vs 11%), Australia (15% vs 6%) and cruises (23% vs 21%) popular destinations.
LV=’s report finds this trend of viewing retirement more positively is set to continue, with future generations similarly optimistic. Two in five (42%) of those not yet retired think retirement will be exciting and three in five (60%) believe they will have the opportunity to do more of what they enjoy. In terms of holidays, younger age groups are hoping to visit more far-flung locations – with 18-24 year olds aspiring to travel as far as Asia (26% versus 11% of 45-54 year olds), Canada (26% versus 17%) and New Zealand (25% versus 17%).
However, despite high hopes for enjoying their retirement years, many of those under 65 believe they will be working past this point, with people expecting to work for an additional four years and two months on average. In fact, one in ten (10%) expect to continue working for more than 10 years after retirement, with this doubling to one in five (19%) for those between 35 and 44 years old. This could be down to a lack of planning as more than three in five (62%) of 35 – 44 year olds don’t know how much is in their pension pot and, of those who do, two thirds (66%) have less than £50,000.
One of the best ways to maximise retirement income and ensure you can live how you want once you stop working is to speak to a professional financial adviser. Yet only one in ten (11%) have seen a financial adviser about their retirement and 70% have no plans to do so. Worryingly, this rises to nearly eight in ten (79%) for over 55s.
John Perks, Managing Director of Life and Pensions at LV=, said: “This is a new age of retirement. With the introduction of pension freedoms, people have more flexibility to take their money as they want and spend it when they want, and there is clearly an appetite for this. However, with this newfound freedom, it is more important than ever for people to understand their options and how they can fully prepare to make the most of this new chapter.
“Bringing pension freedoms into force was just the beginning. As is signalled by the current Work and Pensions Select Committee inquiry, more can be done to ensure the changes are working effectively. While the reforms have the potential to provide consumers with an enhanced retirement, there is evidence they aren’t yet working for consumers, with very few engaging with their pensions. In order for the pension freedoms to be a success, it’s imperative the Government keeps up momentum to ensure consumers are able to get the right outcomes. This includes giving people better information about their pensions through the Pensions Dashboard so people can better plan, and increasing the take up of financial advice.”
LV= wants to ensure everyone is fully equipped to make the most of their retirement funds. To help people check if they are on track, it has created the Retirement Calculator, available on the LV= website.
LV= serves over 5.8 million customers with a range of financial products. We are the UK’s largest friendly society and a leading financial mutual.
When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.
We offer our services direct to consumers, as well as through IFAs and insurance brokers.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. LVFS is a member of the ABI and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.