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Employees plan to increase pensions contributions in light of freedoms

Two in five (39%) employees are planning to increase their pensions contributions in response to pensions freedoms, according to research from Portus Consulting.

Legislation, which came into effect on 6 April, means savers over the age of 55 are now able to access their pensions savings, either as a lump sum or via drawdown.

According to the survey of more than 1,150 people, those aged between 35 and 44 are most likely to increase their contributions, with 44% saying they plan to do so.

It found half (50%) of employees don’t believe they are saving enough for retirement or are unsure whether they are. A further 11% said they were not saving at all for retirement, regardless of the regulatory changes.

The research also highlighted a lack of awareness among employees of how much their employer will contribute to their pensions. Less than half (41%) said they know how much their employer will increase pension contributions by as a result of the changes.

Portus Consulting chairman Stuart Gray said: “There is a lack of financial education and guidance, with employees unsure about whether employers will match their increased contributions, and just as worryingly the majority of employees admit they are not saving enough.

“Employers can play a major role in providing guidance for staff and see genuine benefits without having to make a major investment. There is clearly demand from staff for support, with retirement planning and plenty of support available for employers who want to engage.”

Risk of fraud

Investment management service provider Hargreaves Lansdown has warned that fraudsters “pose another big risk” to pension savers.

Senior analyst Laith Khalaf said although the pensions freedoms bring flexibility, “if [savers] aren’t properly prepared, they may make decisions that are hazardous to their retirement health”.

He added that fraudsters are “no doubt licking their lips at the prospect of billions of pounds being unlocked”.

“Investment products that promise the earth are likely to be a key form of attack for these scam merchants,” he added. “Investors should be extra vigilant for this sort of activity when it comes to their pensions.”

Khalaf said savers should only deal with firms that are regulated by the Financial Conduct Authority (FCA).