The pension provider is currently notifying members of the changes made to their pension pots, as pension freedoms, introduced in 2015, are changing savers approach to retirement.
The asset portfolio will be gradually moved into a mix of equities, bonds and cash over the five years preceding the members’ selected retirement date.
Those who are less than five years away from retirement will keep the same portfolio, which will be more bond focused to lower the risk of the investments.
Both groups can opt-out from these changes, after receiving the letter from the provider.
However the changes have raised some concerns among advisers about providers acting without knowing the individual circumstances of the retiree, and so what is best for them.
Peter Glancy, head of policy development at Scottish Widows, said that “prior to pension freedoms, the typical retirement journey for people in workplace pensions was to work until retirement age and then purchase an annuity”.
After pension freedoms, only 30 per cent of members were taking an annuity, with the remaining 70 per cent opting to stay invested for longer.
According to Mr Glancy, there are several ways to stay invested: “One is to take the tax-free cash and leave the other 75 per cent invested; other way is to going into income drawdown; and another is to postpone the retirement decision, and buy an annuity at a later age.”
This became a problem for Scottish Widows, since the provider was taking people’s investments “out of equities and putting them mainly into bonds, which was giving a very low level of investment return”, he said.
“We decided to change the default option, not to target people that were taking annuities, but to target people that were staying invested for longer, so they could continue to get growth on those assets,” he added.
Scottish Widows gave customers a period of 60 days to request continuing with an annuity and not have their investments changed to a more flexible approach.
“Very few people came back saying [they wanted] that,” he said.
It is to early, however, to know the numbers of clients that opted for an annuity or for a flexible access to their pensions, Mr Glancy said.
He said: “We mailed the financial advisers first, then the employers and we are now in the process of mailing customers.
“I expect that this process is concluded by the end of the year.”
Ben Smaje, chartered financial planner and managing director at Kennedy Black Wealth Management, said that Scottish Widows' strategy change is good on paper, since he believes annuities “will disappear largely”.