Savers gearing up for the brave new world of pensions – and many might even save more

22nd September 2014

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On the back of the pension’s system shake-up announced in the Budget earlier this year – from next April savers will be allowed to do as they wish with their nest-egg when they retire.

A survey from trade body, the Association of Investment Trust Companies (AIC) shows that not only are 44% of respondents now feeling more positive about pension schemes as a result but more than a quarter, at 26%, of those who plan to retire said they were more inclined to increase their pension contributions because of the changes.

Coming in from the cold

When asked why these changes made them feel more positive towards pension schemes, the key reasons given were:

Concerns over annuities

The research highlighted that views were mixed on annuities where 35% of respondents who plan to retire said that they would not purchase an annuity with any of their pension fund. In addition, some 27% said they did not know how much they would invest in an annuity.  Only 2% said they would be willing to use their entire pension fund to buy an annuity.

When asked what might discourage them from purchasing an annuity, top answers given by respondents were:

A long-term approach

The research showed that adults recognise that planning for an income in retirement is a long-term affair. Some 59% of respondents who intend to retire believe that they will be in retirement for 20 years or more.

Ian Sayers, director general, AIC said: “Experienced investors already know about the long-term benefits of investment companies in building a fund for retirement.  The most recent research from Canaccord Genuity shows that investment companies have outperformed comparable open-ended funds in 12 out of 15 sectors over 10 years.

“However, investors are now realising that planning for an income in retirement is also a long-term affair, which is where investment companies come into their own.  With their ability to smooth dividends and access to a wider range of income-producing assets, investment companies have some unique advantages over other funds when it comes to delivering a higher or growing income.

“Annuities will remain the right choice for some but, for those that can accept the risks, investment companies are an obvious candidate for part of a long-term income portfolio in retirement.”

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