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New research shows that savers think the new pension freedoms mean they have to take their cash now – but it might not be the right choice:
New research commissioned by The People’s Pension and State Street Global Advisers (SSGA) has revealed savers are struggling with the choices they face. It highlights that many feel they must cash in their pension, when it may not be the correct option for them.
In one of the most in-depth research studies into decision-making under UK Freedom and Choice so far, it tracks how people have made their retirement decisions, the emotions they experienced, and the barriers they had to overcome across a six month period.
The report, New Choices, Big Decisions: Exploring Consumer Decision Making and Behaviours Under Pension Freedom and Choice, includes 10 key questions savers should ask themselves in order to make the most of their retirement savings.
The in-depth study conducted by independent research agency Ignition House reveals:
“I think it’s because I used to read a lot of stuff in the paper… and particularly financial forums… and a lot of people were desperate to get this money out. I thought that if I didn’t take it out it might come to an end,” said one respondent.
“It’s a very serious matter. If I muck up at 60, I muck up for the rest of my life, I’ve got to get this absolutely correct and that’s the problem, it’s a minefield.”
“I have been looking online to try and understand my pension choices. There is so much to read that once again I feel overwhelmed by the information so have decided to look at it again when I have more time.”
“I emailed my provider over the weekend as they did not appear to offer a facility to withdraw random amounts of cash… Sure enough it was on the website, but under 2 the title Flexible Transitions Account. It was not clear (to me) that it was applicable to my circumstances. Perhaps I’m being thick here.”
“I will not be seeking help as the two pensions I am looking to take 25% from are only very small and I cannot justify the outlay. It is a shame that the cost of financial help is so prohibitive for people with small pension pots such as me.”
Alistair Byrne, Senior DC Strategist at SSGA, said:
“Information is emerging on the decisions DC scheme members are making under the pension freedoms, and this new research allows us to understand in detail the reasons why and the challenges people face.
“It’s clear there is more the industry can do to help support people to make the most of their retirement savings. We need to better articulate the choices people face – including the option to leave money in the pension scheme until it is needed – and to adopt clearer and more consistent language in our communications.”
Darren Philp, Director of Policy and Market Engagement at The People’s Pension, said:
“While savers generally welcome the new flexibilities, it is clear that they are struggling to compare options and get the right information at the right time to help them make the right decisions. People need a helping hand to understand their options, and industry jargon isn’t helping. This highlights appropriate guidance and advice, and also for appropriate defaults.
“People feel that they are being forced into making a decision, whether that is because they fear the rules will change again or whether they believe they have to because of the way that choices are presented to them. But people don’t need to rush. The new retirement freedoms have given savers the power to access their pension savings earlier, but not necessarily the knowledge or tools to make the right choice for their future.
“What has been a little lost in the debate about accessing retirement savings at 55 is that that they are exactly that, retirement savings. Nobody knows how long they are likely to live, so how long they need to make their money last. The research shows that people know they can take action, and many feel they should – but for many, no action might be the best choice for now. Just because people can access their savings earlier doesn’t mean that they have to do it.”
The full report, New Choices, Big Decisions: Exploring Consumer Decision Making and Behaviours under Pension Freedom and Choice* can be found ssga.com/ukdc.
Notes to editors
The ten key questions are:
* 110 pension scheme members
About The People’s Pension
The People’s Pension is the largest private sector mastertrust (multi-employer pension scheme) in the UK, with 1.8 million members and over 15,000 employer accounts.
Run by B&CE, a not for profit company, it offers a simple and low cost automatic enrolment workplace pension solution for employers of any size from any sector. We tweet as @peoplespension.