Pensions - Articles - Private pension income is falling

Pension ‘freedom and choice’ introduced four years ago may be giving pension savers more freedom to access cash, but so far that isn’t translating into higher incomes, according to Just Group.

 The latest Pensioners’ Income Series figures released by the Office for National Statistics last week showed that overall incomes for pensioners were flat and that private pension income – received from workplace or personal pensions – has fallen.

 While gross income from private pension sources more than doubled in the two decades to 2014/15, since then it has slipped back.

 The 2017/18 figures just published showed income from occupational pensions was £148 a week (down from £160 in 2016/17), the lowest for four years while income from personal pensions was £19, the lowest for six years and down from £23 the previous year.

 “When George Osborne unveiled his pension ‘freedom’ plans in the 2014 Budget, he didn’t make any promises about it giving people more money,” said Stephen Lowe, group communications director at Just Group.

 “I think most people understand from their own banking that in order to have easy access to cash you may need to compromise with lower returns. And the same applies to pension savings.

 “Over time, I’m sure there will be clear winners and losers from the reforms but these figures don’t show that the average pensioner is winning – greater pension freedom is not equating to greater pension income.”

 He said that Just Group supports the pension reforms because they recognise the benefits of flexibility, allowing pension savers to better tailor their finances to their own aspirations.

 “We can all think of examples where the extra flexibility gives options that suit some people, such as gifting money to children, taking the holiday of a lifetime, starting a business or renovating a home,” he said.

 “However, pensions are primarily designed to provide income in retirement and money taken early will not be available later. While that may be obvious, there are some less obvious knock-on effects from withdrawing money early – savers may well find they are not able to continue to save as much as they want or need until they fully retire as they become subject to stricter tax rules.

 “Our view is that true pension freedom comes when you have enough income secured to pay for the retirement you want –only then are you free to spend, invest or give away the rest.”

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