Pensions rule changes will hurt the young

Around 11.4 million workers currently in their 20s and 30s will end up worse off as a result of reforms to the state pension, according to research by think tank Pensions Policy Institute (PPI). The government has claimed that changes to how state pensions are calculated that take effect this week will benefit younger workers. However, the PPI says that most will end up with a smaller pension than they would have done under the old regime due to the abolition of the second state pension (known as Serps), under which workers could build up an extra pension based on their earnings.

The PPI estimates that 75% of people in their 20s will lose an average of £19,000 over the course of their retirement, while 66% of workers in their 30s will lose out to the tune of £17,000 on average. However, it's not bad news for everyone. The rest of the workers both in their 20s and 30s will gain an average of £10,000.

The Department for Work and Pensions says young people will benefit from being automatically enrolled into workplace pensions, which means that more will have the opportunity to build up larger entitlements through these schemes. This could offset the loss of Serps. But many people don't fully understand how the pensions system works and won't even be aware of the existence of a state second pension. So it seems optimistic to assume they will be aware of the need to save enough through workplace or private pensions to replace it.

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The last set of pensions changes that were introduced in April 2015 were hailed as a great opportunity for savers to make the most of their retirement savings. But the freedom to cash in some or all of your pension can also be a risky decision especially for people who do so without specialist guidance. It leaves many open to pension scams and at risk of running out of money in their later years.

So it may be worrying that even though the new rules have been in place for a year, few people are yet thinking of seeking advice on the best way to spend their pension pot. Just one in five of those who are due to retire in the next five years plan to take paid-for, regulated financial advice, according to a new survey conducted by insurer Liverpool Victoria (or LV= as it clumsily brands itself these days).

Some 40% of those aged over 55 don't plan to take any guidance at all, whether free or paid-for. This figure increases to 50% of those respondents aged 50 or more. A fifth said that this is because they are worried about the high prices of financial advice. Others said that they don't trust financial advisers, while almost a quarter think that free advice is sufficient.

While the financial services industry has every incentive to scare people away from making their own decisions and encourage them to pay for advice, there are certainly potential dangers in pensions freedom and educating retirees on making the right decisions will be important. "If you think of the government campaigns about wearing a seatbelt and stopping smoking, I think we need to be equally interventionist about this," Liverpool Victoria's Richard Rowney told The Guardian.

It's now possible to get your state pension forecast online using a new tool that's been added to the government website. Previously, only people aged 50 or over were able to get a forecast and needed to apply over the phone or by post. But the new service lets anyone get an estimate of what their pension will be, solely by providing passport details or a P60.