Pension reforms improve UK readiness for retirement

Eight per cent of the UK population are on track to have a large enough pension for the retirement they'd like, according to recent data published by Aegon UK. This is an increase of 14 per cent from May 2015. 

However, this does mean that 92 per cent of the population are not on track for the retirement that they want. A key worry across the financial industry is that cases of fraud are increasing as people try to find ways to save more money. It's reported that one in five people receive illegal cold calls.

The pension reforms are responsible for the increased number of people now contributing to a pension, with 20 per cent of people now choosing to save more for retirement since its implementation in April.

The financial behaviour of UK citizens have also improved since the reforms came into play earlier this year. 22 per cent of people have checked the performance of their retirement savings, up three per cent from May 2015. In addition, 20 per cent have taken steps to review or amend their previous retirement planning. Of those who were already saving with an official pension plan, 29 per cent checked its performance and 26 per cent chose to amend it.

As a result of this more active approach, the UK's readiness score for retirement has risen from 47 to 49 within the last six months. However, despite the planned increases to the state pension age, most people within the UK still hope to retire by the time they reach 63. 

The average amount that UK retirees hope to have each year is £43,000. This remains unrealistic, as it would be necessary to have a full savings pot exceeding £1 million. Currently, the standard retirement income of UK citizens amounts to £14,500, which has seen a slight increase in the last six months. 

Along with an improved readiness for retirement, the pension reforms have unfortunately also prompted a large increase in fraud. 19 per cent of people in the UK have received a cold call offering a free pension review or pension investment opportunity. A further 15 per cent have received an offer suggesting they can access their pension pot before 55, and 11 per cent have received a text message offering a free pension review or pension investment opportunity. These numbers are worryingly high, especially considering that 25 per cent of the UK public are not aware that the reforms have increased the likelihood of pension scams.

Mark Till, managing director at Aegon UK Direct, said: "While an additional 400,000 people are on track for the retirement they want, 92 per cent are still falling short of their retirement targets. This is a small improvement but we’re optimistic the pension freedoms have reignited people’s interest in their pension and that we should see greater engagement in the years to come."