Auto-enrolment is still young and it does not make sense to drive them to cash with the new pension freedoms, Rob Booth has warned.
The director of investment and product development for Now: Pensions, said that, last year, the auto-enrolment provider changed its so-called ‘glidepath to retirement’, moving from an annuity- hedged approach to a gradual derisking to cash.
He said: “We looked at our membership and the level of contributions and we forecast what could happen. It was pretty obvious to us for the foreseeable future our members would have such low funds that those retiring in the next few years would be taking their funds as cash.
“Since then, we have been reviewing what we should be doing in terms of flexible drawdown.
“The number of members aged over 55 with access to £10,000 or more is minimal. It is about one in 1500. But we are young and autoenrolment is young.
“For those members who will want to stay invested with us or elsewhere it makes sense not to drive them towards cash.”
Pete Matthew, managing director of Penzance-based Jacksons Wealth Management, said: “The people who will take the full amount out are people who may be lowish paid workers who have a pot with £5000 and they want to change their car, for example. But our core clients have quarter of a million pound pension funds and other assets.”