Knowing what customers want and identifying the barriers preventing schemes from providing what customers want, is the key to breaking the pensions deadlock, research has found.
The National Association of Pension Funds (NAPF) carried out research four months after the government brought in the pension freedoms and choice.
However, according to the report, such flexibility and freedom has actually been “more frustration and captivity, with media headlines suggesting that savers have struggled to access the freedoms promised.”
The 28-page report, Pensions Freedoms: Breaking the Deadlock (Understanding Retirement; Wave II Interim Report), researched 1042 consumers aged between 55-70 who are able to access the new pension freedoms.
According to the research, large numbers of consumers “remain unsure” of their course of action, or are waiting for the market to develop.
At the same time, the risks and costs of putting fully designed retirement solutions in place without a clear view of consumer demand are just two of the “host of factors preventing schemes and providers from creating new retirement income solutions”, the NAPF said.
Figures from the NAPF report suggested there were 3.7m individuals aged between 55-70 in the UK with pensions not yet in payment.
Of these, there are 2.2m people with £175bn of defined contribution (DC) pension savings.
Most savers - 56 per cent - said they still had not decided how they wanted to access their pension savings, while only 17 per cent said they intended to make full use of the freedoms brought in earlier this year.
As a result, the survey revealed that consumer demand still remained uncertain. It said: “Several barriers remain for schemes to develop solutions or signpost their members to good products.
“Few schemes are designed to facilitate drawdown and trustees, schemes and their administrators face very considerable costs if seeking to build drawdown within schemes.
“Alongside this, the sector lacks people with experience of drawdown who can develop the solutions.”
In addition to the lack of real innovation and flexibility, the NAPF found that the uncertainty of the regulatory landscape also created some problems for consumer and provider alike.
While there are several consultations taking place across the FCA, the Pensions Regulator and HM Treasury on matters such as advice, product innovation and take-up, regulators are also bringing in new codes of conduct and rules to ensure that these reflect the pensions freedoms.
This means that developing new products in this environment is “challenging”, with industry players naturally “exercising caution” about committing resources when the terms of operation might be subject to change.
According to one respondent to the NAPF’s research, “The government needs to give the industry time for the freedoms to embed. We need to make sure safeguards are in place”.
In order to break this deadlock, the NAPF recommended that the marketplace would best meet the needs of consumers by developing a small numebr of large schemes and providers offering high-quality, accredited products that would be easy for savers to choose and access.
Also, advisers and guidance services should be able to signpost consumers to these products, and trustees and others should be allowed “safe harbour” to signpost these to savers, without the fear of being considered to have “given advice.”
