What pension freedoms have done to bankers’ pension pots

Bankers may well have shunned the stereotype of splashing out on fast cars and long lunches last year in favour of topping up their pension pot, research shown exclusively to City PM suggests.

According to the study by Aegon, 22 per cent of banking, financial management and accountancy professionals now feel like they are on track for the retirement of their dreams, compared with just 10 per cent when the same question was asked the year before.

The boost in preparedness has coincided with the introduction of the pension freedom rules, which allow those aged over 55 to access their pension pot without first purchasing an annuity. Around a quarter (22 per cent) of those surveyed said they have been saving more as a direct result of the rule change.

"As we enter an era of personal responsibility for retirement saving, it's clear that the pensions penny is really starting to drop for these professionals," said Kate Smith, head of pensions at Aegon UK. "Auto-enrolment and the pension freedoms have clearly played their part in getting more workers in this sector prepared for retirement than ever before"

Those working in banking, financial management and accountancy are among the most prepared for when they give up the day job, coming second to only those working in IT – of whom 23 per cent say they are on track for the retirement of their dreams.

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By comparison, Aegon also discovered that just 12 per cent of the UK overall is on track to achieve their retirement goals.

The banking, financial management and accountancy professionals surveyed put away £443 per month on average to save for their golden years, second only to their colleagues in the pensions and insurance sector, who added £592 a month.

Not everything is rosy for retirement for banking, financial management and accountancy professionals, however. While people in these jobs are crossing their fingers that they'll be able to rake in £51,800 per year once they retire, Aegon calculates that the current value of their savings will leave them with something closer to £18,100, a shortfall of £33,700.

Smith added:

While workers in this sector may be better equipped than most to understand the value of saving for retirement, and exhibit high savings levels, the statistics highlight that 78 per cent of banking, financial management and accountancy workers are still falling short of their retirement targets. For workers in this sector to make the needed improvements, income expectations must become more aligned with reality.

To achieve the desired income in retirement of £51,800, these professionals would need to build a pension pot of well over the maximum £1m that is allowed under pension tax rules without incurring additional tax bills.