Three insights into unsettling pension freedoms data
By Tom Carnegie, 22 Mar 18
The Financial Conduct Authority has released figures on pension freedoms that product providers have described as “concerning” and “do not make for comfortable reading”. International Adviser spoke to industry experts to get their thoughts on the data.
Steven Cameron pensions director at Aegon said the figures show the “three most significant factors” affecting behaviours and attitudes in the retirement income market are age, the size of a clients pension pot and whether they have taken financial advice.
“One clear finding is that those with small pots are more likely to cash them in fully. For pots of under £10k ($14,000, €11,444), 85% were encashed in full, whereas only 2% of pots above £250k were taken fully in cash.
The whole picture
He said as people change jobs, they build up several pensions, often of modest size.
“Individually, they may seem insignificant and the temptation may be to cash them in. But looked at together, their worth could be much more substantial and prompt more serious consideration when it comes to making best use of them to fund retirement years.
“Even if pots aren’t physically combined, the development of pension dashboards, allowing an individual to view all their pensions together, could change attitudes and behaviours,” he said.
Cameron said while 68% of drawdown cases were set up through an adviser, that leaves more than two hundred thousand plans where savers are taking the risk of going it alone.
“The proportion of drawdown cases which are arranged by an adviser remain above two thirds, well ahead of annuity purchases or full withdrawal, both of which sit at around one third.
“With new data showing assets in drawdown have grown by a huge 33% to £101bn across 679,000 plans, ongoing advice here is critical, to review investment strategy and to check if the income being taken looks sustainable for life,” he said.
Tags: Aegon | AJ Bell | FCA | Old Mutual | Pension Freedoms
