Today marks the anniversary of both the new state pension and the new pension freedoms.
However, new research from Aviva suggests work to improve pension saving is far from done as awareness and understanding amongst the public remains low. Millions of young people under the age of 35 remain blind to the changes that will shape their retirement futures more than any other generation before them, Aviva claims.
Recent research from Aviva has identified that 35% of 18-to-35 year olds believe their generation has been priced out of the property market, and 18-to-35s typically carry more than £6,000 of debt, and graduates expect to wait at least 11 years before they will pay off their student loans.
While the young have time on their side to plan and prepare, Aviva’s research shows that confidence and awareness in the recent pension changes amongst the younger generation is weak.
The new state pension was introduced in April 2016, designed to simplify retirement provision from the state.
According to Aviva’s latest research, however, less than 18% under-35s are confident they will get money from the state when they retire. Of the 14 million people aged 20-to-35 in the UK, four-in-five, or 11 million, are not confident they will receive the state pension at retirement. Amongst those who think that money from the state in retirement is at least still “possible”, only 20% are certain of the amount they will actually receive.
When it comes to their retirement age, current legislation says the state pension age for those under 35 will be 68, yet Aviva’s research finds that 65% of this population believe they will receive it before this age. This equates to nine million young people expecting a state pension before they will receive it.
The recent Cridland Review proposed a further acceleration in the state pension age which could mean that more people will be unclear of when they can retire, if understanding is not improved.
The new pension freedoms were introduced in April 2015 and were designed to give private pension savers more options in what they can do with their money from age 55.
50% of under-35s claim they know nothing about the pension freedoms. That is the equivalent of nearly seven million people.
Yet, when the freedoms are explained to the under-35s, more than 70% believe the changes make saving into a pension a more attractive option.
Alistair McQueen, head of savings and retirement at Aviva, said: “We’re living longer but not saving enough for our longer lives in retirement. The UK is not blind to this problem and has spent a huge amount of time, money and effort modernising the country’s pension system over recent years. Aviva’s research finds we are still to get the full benefit of this investment, especially amongst the young.
“As many as 14 million young savers today understandably see retirement as tomorrow’s problem. Yet the retirement challenges facing today’s under-35s are arguably greater than those faced by any recent generation. We need to reframe how we see this challenge and position it as a challenge for the young, not just the old.
“The internet is increasingly replacing friends and family as a source of help and guidance, yet the pensions world is often in the stone age in its adoption of technology. Aviva is keen to play its part in changing this – on our own, with developments such as MyAviva, and across our industry, with developments such as the Pensions Dashboard.
“We need to encourage action amongst today’s young and ensure all concerned understand what lies ahead. If this greater understanding is translated into greater action there could be as many as 10 million more active young savers in coming years.
“With greater understanding, I am confident the young will be better placed to take control of their futures and will seize this responsibility.”