New data has emerged that show people intend to focus on using their pension pot to get a income in retirement post-April, with only a minority intending to take the cash for a spending splurge.
However, of 2,000 consumers surveyed by RS Consulting on behalf of the National Employment Savings Trust, the largest group of respondents accounting for more than one in five said they did not know what they will do when new freedoms come into force.
The results, which were garnered from a general study of employees eligible to be auto-enrolled, highlight the importance of guidance services and advice in helping people understand their choices.
The study found:
• just 7 per cent intend to take their whole pot out at once and do whatever they like with it;
• a further per cent tend to take it all out and invest in non-pensions assets “in a way that gives an income from it”;
• 19 per cent intend to leave it invested and take an income from it;
• 16 per cent want to convert it all into a regular retirement income guaranteed for the rest of their life;
• 19 per cent plan to convert some of it into a regular guaranteed income and invest the rest in a way that gives an income from it; and
• 13 per cent plan to convert some of it into a regular retirement income guaranteed for the rest of their life and take the rest as cash, to do as you please.
Nest’s findings back another survey carried out this month which found that nearly 70 per cent of all those with defined contribution pensions would prefer a secure guaranteed income over an income that may rise or fall depending on financial markets.
A study by the International Longevity Centre - UK, which surveyed 5,000 people aged 55-70 who are yet to retire or draw on their private pension wealth, found that people still favour a guaranteed income.
Nest’s research also showed that the 2014 Budget reforms have boosted pensions awareness, with 34 per cent of people saying they will think about their retirement plans sooner and 29 per cent stating they will pay more into their pension as a result.
Tim Jones, chief executive of the Nest Corporation, added that understanding about what the pension reforms mean is still patchy.
“Just over half (52 per cent) of survey respondents were unaware they had happened and more than a fifth (22 per cent) admitted they still do not know what they would be most likely to do with their pot when they come to retire.”
Meanwhile, Nest found that intermediaries have played a “vital role” in the success of auto-enrolment so far, and as small and micro employers reach their staging dates this year, 74 per cent will turn to advisers for support.
The research showed that 35 per cent of Nest’s customers said that providers they approached were unwilling to enrol their entire workforce and 40 per cent of independent financial advisers claimed that pension providers had declined to write schemes for one or more of their business customers.
A third of this group went so far as to say that it happened either ‘frequently’ or ‘all the time’.
Although compliance is the priority for employers, a significant number are also likely to want help with ongoing administration and setting up a scheme.
When asked, 59 per cent of small and micro employers said they are likely to ask an accountant for help and guidance while preparing for auto-enrolment. This becomes even greater among employers with one to four workers, with 70 per cent indicating that they intend to turn to an accountant.
IFAs and payroll providers are the next most likely source of support, although the levels are significantly lower.
However, the research noted that while accountants were the first to be turned to, there were divergences in preparedness between them and IFAs, who were generally better positioned to provide support.
peter.walker@ft.com
