Deadlock has been one of the main outcomes of the government’s pension freedoms so far, research from the National Association of Pension Funds has found.
According to a 28-page report, Pensions Freedoms: Breaking the Deadlock: Understanding Retirement, the pensions flexibility and freedom instituted in April has actually been “more frustration and captivity, with media headlines suggesting that savers have struggled to access the freedoms promised”.
NAPF carried out research among 1,042 consumers aged between 55-70 and therefore eligible for 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.
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.
3.7m individuals aged between 55-70 in the UK have pensions not yet in payment.
Of these, there are 2.2m people with £175bn of defined contribution pension savings.
70 per cent of 55-70-year-old DC savers are attracted to the idea of drawdown.
54 per cent said they would decide on a new provider or scheme using an IFA.Source: NAPF
As a result, the survey revealed that consumer demand remained uncertain, despite a strong preference for drawdown-type products among DC savers, at 70 per cent of respondents.
The survey stated: “Several barriers remain for schemes to develop solutions or signpost their members to good products.”
At the same time, the risks and costs of putting fully designed retirement solutions in place without a clear view of consumer demand were just two of the “host of factors preventing schemes and providers from creating new retirement income solutions”, NAPF said.
“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, NAPF found that the uncertainty of the regulatory landscape also created some problems for consumer and provider alike.
To break this deadlock, NAPF recommended that the marketplace would best meet the needs of consumers by developing a small number of large schemes and providers offering high-quality, accredited products that would be easy for savers to choose and access.
Stuart McNeil, financial adviser at Lancashire-based McNeil Financial Services, said: “There is a lack of understanding of the pension reforms, with things such as the implications and death benefits, so I understand there is frustration.
“Also, there has not been much innovation in terms of products. It seems providers are waiting for others to move. General enquiries have been from people wanting to take out all their benefits, we send them back to the providers, who tell them they must first seek financial advice, so there is a bit of a catch-22 situation.”