In just over a couple of months’ time, the Government’s retirement revolution will be under way, giving people aged 55 and over much more freedom and choice over their savings pots.
From early April, people will no longer be herded towards using their defined contribution (DC) pension pot to buy a retirement annuity, which gives them a yearly payout.
While annuities generally act as a guarantee that someone will not outlive their savings, they have been controversial in recent years, often due to people failing to shop around to get the best deal for their circumstances.
From April though, people will instead be able to take their pension pot as they want, when they want it, subject to their marginal rate of income tax in that year. They could take it all in one lump sum or in a series of slices.
The changes do not apply to people with “gold-plated” final salary pensions, which are becoming increasingly thin on the ground, as these already provide someone with a guaranteed income after they retire.
So what will this new era of greater choice look like?
Well, firstly, we’ve recently been told by the Government what the new free, impartial guidance which will be offered to anyone who could take up these new freedoms will be called.
The guidance, which will be offered by Citizens Advice and the Pensions Advisory Service will go under the name “pension wise”.
In order to ensure that the guidance brand is trusted, the imitation of pension wise will be illegal and anyone seeking to falsely pass themselves off as the service could face prosecution.
New research has also emerged which suggests that the world of work and retirement could see a dramatic shift in the coming years.
Ros Altmann, the Government’s older workers champion, recently commissioned a study among more than 2,000 retired and non-retired people over 50.
The survey, which looked at attitudes towards working in later life, found there could potentially be a large increase in people working beyond the age of 65 in the coming years. In fact, the survey found that the “overwhelming majority” of people want to keep working until the age of 65. More than half of those surveyed want to still be in work when they are between the ages of 65 and 70 – although preferably on a part-time, rather than a full-time basis.
Dr Altmann says that if the results are applied to the whole UK population, this suggests that 4.8 million people want to keep working and not be retired between the ages of 65 and 70.
Currently, there are around 1.2 million over 65s in work, so these findings suggest that there is a potential for a significant increase in the number of people working in later life.
So as the new era of greater choice dawns, is it time to look again at what our perceptions of “retirement” are – and perhaps change them?
Dr Altmann argues that traditional ideas of retirement, where you reach a certain age and stop working completely, are simply “outdated”.
According to her findings, more than one third of those who are already retired would advise people to work part-time before retiring altogether.
Dr Altmann said that one “fascinating finding” which came out of the research is that nearly half of over-50s surveyed were unaware that they could potentially work beyond the age of 65 without having to pay national insurance.
This suggests there is perhaps more work to do to help people better understand the potential benefits of working longer if they wish to.
Dr Altmann also says that to help make working later in life a reality for those who want to, employers will also need to make some changes.
She says: “If employers can help people to combine training for new roles, or improving their skills, with flexible working as they get older, the survey suggests there would be a major increase in wellbeing for our ageing population, as well as better economic growth.”