One provider, Scottish Widows, has published data showing that from the initial surge at the beginning of April until the middle of May it has seen a 72 per cent drop in full pension encashment requests.
The firm added that in the last couple of weeks these requests accounted for half of customer intentions, compared to more than 70 per cent in the first few weeks of the reforms.
Scottish Widows explained that around a fifth of its customers became eligible to access their pension under the new freedoms, with the average size of pot being cashed in full being less than £20,000 and 85 per cent of requests coming in for pots worth less than £30,000.
Fidelity Worldwide Investment meanwhile reported that most of its direct consumer customers just want to take the tax-free cash, with 61 per cent of calls coming from people who want to do just that and enter drawdown with the remainder of their pot.
The firm added that cashing out in full has been low among direct customers at 6 per cent of retirement enquiries, compared to 19 per cent of enquiries from group pension customers.
Furthermore, while 10 per cent of Fidelity’s direct customer calls have been to discuss options, the figure rises to 30 per cent for group pension clients. It said this reflects the more proactive attitude of those who generally have bigger pots to play with.
Scottish Widows also stated that while requests for full encashment have cooled, customer demand remains high with an increasing proportion of customers wanting to have detailed conversations about their new options, including drawdown and partial encashment.
It has also seen a significant increase in customers going to Pension Wise in advance of contacting them, with 3 per cent in the first week rising to a third of customers within a month of 6 April.
Robert Cochran, pensions development manager at Scottish Widows, said: “Although our data has shown an increase in Pension Wise awareness, there is still work to do in closing the knowledge gap and encouraging people to use the service.”
Fidelity also reported confusion on several points, including defined benefit transfers and the tax implications of the freedoms.
Nearly one in ten (7 per cent) of those calling the firm have been DB clients wanting advice on how they can benefit from the new flexibilities and seeking to transfer out.
It said this is primarily being fuelled by callers wanting to take control of the pot should they die early, nearly all of whom are then put off once the cost and value of the DB scheme once it is explained.
Customers are also particularly concerned by the lifetime allowance limit, with an equal split between those who are looking for protection from the £1m reduction and those who are already over that limit and want to know their options.
Richard Parkin, head of retirement at Fidelity Worldwide Investment said: “Misunderstandings do exist around the value of their existing benefits such as DB schemes but, once they realise what they would give up, appetite does drop off.
“Observations such as this show that people need to keep doing what they are doing: namely getting to grips with what they have and not to rush any decision. It also shows that the industry must ensure that customers understand what they are doing in terms of consequences and not just executing requests regardless.”
Anecdotes from Fidelity’s telephony teams included people using their tax-free cash primarily to pay off debts, mortgages or to buy property for their children.
They also said that between three or four calls a week still come from people in their twenties and thirties seeking to access pension savings, while of the small amount of people calling about an annuity, half of this number wants to see if they can sell it.
peter.walker@ft.com
