Almost two-thirds (63%) of respondents are actively considering how to access their defined contribution (DC) pension savings through the flexibilities that came into effect in April 2015, according to research by the Pensions and Lifetime Savings Association (PLSA).
Its Pension freedoms: no more normal report, is based on a survey of 1,042 adults aged between 55-70 conducted in March-April 2015, a survey of 2,000 adults of the same age in October 2015, and life logs completed by 24 50-70 year olds in the six months following the introduction of the pension freedoms. The research also found that 14% of respondents with DC pensions pots have accessed their pension savings for the first time under the new freedoms.
The research also found:
- 23% have not taken any action since the flexibilities came into effect.
- Those respondents who have not taken any action represent £24bn of DC wealth, while those who have accessed their pension and those who have started to consider accessing it represent £50bn and £164bn of DC wealth, respectively.
- Of those respondents who have not taken any action, 85% have low or medium levels of financial confidence, 65% have an income below £35,000, and just 16% already receive income from another pension.
- Of those respondents who have made use of the pension freedoms in the six months after they came into effect, 72% already receive a pension payment, 33% have a household income above £35,000, and 35% have a high level of financial confidence.
- Among those who exercised the pension freedoms, 37% have taken tax-free cash, 14% have chosen either taxed or tax-free cash, 27% have opted for drawdown, 20% have chosen an annuity, and 1% have opted for a combination of cash, annuity and drawdown.
- 57% of DC savers who have taken their pension as a cash lump sum have saved some and spent some, 19% have saved or invested the money, and 18% have spent it all.
- Of those respondents who are actively considering how to access their pension under April 2015’s flexibilities, 73% have or plan to seek help from their pension provider or scheme, 36% look to their employer, 34% to the Pension Wise service and 52% have or will look online for help.
- Just 23% of those in the investigation stage have made a final decision about what they will do with their DC pension. Of these, 46% plan to take the money as cash and 45% plan to invest in drawdown.
- More than a third (35%) of all respondents with both DC and defined benefit (DB) pension pots rate their financial capability as high, compared to 33% of those with just DB pots and 26% of those with DC pensions only.
Joanne Segars (pictured), chief executive at the Pensions and Lifetime Savings Association, said: “The message that comes through loud and clear from our research is that there’s no more normal when it comes to deciding what to do with savings at retirement.
“Pension freedoms have destroyed the traditional norms leaving a blank canvas for millions of people. This first cohort of savers are effectively pension pioneers, working out how to make the right decision with their savings but at the same time naturally fearful of making a poor decision in uncharted territory.”