Research from the Pensions and Lifetime Savings Association has suggested there is “no more normal” when it comes to those retiring under last year’s reforms.
The survey conducted in March to April of 1,042 adults aged 55 to 70-years-old, with a follow-up poll of 2,000 adults in October, sought to better understand the decision-making process for over four million individuals in this age group.
It found among those who have already accessed their pension, only 39 per cent sought out financial advice and only 22 per cent sought help from the Pension Wise guidance service, with the majority of these using the website only.
Of these people, 2.8 million have at least one defined contribution pension pot not yet in payment; 1.8 million have at least one defined benefit pot not yet in payment and 500,000 have both defined benefit (DB) and defined contribution (DC) pots not yet in payment.
The research focused on the 2.8 million with at least one DC pot not yet in payment – what the PLSA called the “pioneers” of the pension freedoms.
Among this first cohort, it identified three clear groups of people:
Actioners – early adopters, a distinct and affluent group, many with experience of self-invested personal pensions or income drawdown
Investigators – assessing their options, the largest group, limited experience of drawdown, limited DC savings but largely reliant on DC and other savings for an income in retirement
Inactives – the most vulnerable group, many still working, this group is the most reliant on their DC savings to provide an income in retirement but have the lowest levels of financial confidence
Of the 400,000 ‘actioners’, 39 per cent took advice from an IFA and 25 per cent paid for financial advice.
However, 61 per cent did not take advice from an IFA because 46 per cent already had enough information and felt they did not need an adviser, 41 per cent preferred to make their own decisions, 27 per cent said the cost was too expensive, 21 per cent did not trust IFAs and 2 per cent said they had not been able to find an adviser.
The findings warned against placing too much weight on the experiences of the actioners, as it is clear they are by no means representative of the 2.8 million with at least one DC pot not yet in payment, nor of the longer term challenging trends that could emerge.
PLSA chief executive Joanne Segars said: “The message that comes through loud and clear from our research is that there is no more normal when it comes to deciding what to do with savings at retirement.
“This first cohort of savers are effectively pension pioneers – working out how to make the right decision with their savings but at the same time naturally fearful of making a poor decision in uncharted territory.”
Nathan Long, head of corporate pension research at Hargreaves Lansdown, said the finding support the trend that the next wave of retirees will be more inclined to buy annuities than those who were first to test drive the new pension freedoms, who have favoured remaining invested through retirement.