One in five workers say they will take their pension as a lump sum irrespective of whether they had other savings elsewhere, according to the NAPF’s Spring Workplace Pensions Survey 2014.
The trade body suggests its figures show the number of pensioners choosing to take cash could be significantly higher than the Government anticipates, with subsequent ramifications on retirement income and state pension-reliance.
The research also found that 61 per cent of survey respondents say they feel capable of deciding what to do with their pension savings. People were generally fairly cautious about how they plan to utilise their pension pots, with 58 per cent preferring to receive a regular income for life rather than risk their money running out.
When asked how people would like to receive guidance or advice on what to do with their savings only 14 per cent felt they would not need any help. The most popular choice was face-to-face independent advice, chosen by 29 per cent, but respondents from lower income households were far less certain about whether they would use the service at all, with 39 per cent of that group saying they were unlikely to use it. Only 43 per cent were prepared to contribute towards the cost of independent advice and no respondent was prepared to pay more than £500. Only 3 per cent were prepared to pay more than £200.
But 24 per cent said they expect to take all of their pension savings in cash because they have other sources of income. Just under half – 47 per cent – were worried their pension would run out and they would need to rely on the state.
The research also found more than a quarter of consumers are now more likely to start saving or save more into a pension following the reforms announced in the Budget.
The research found 28 per cent said they would start saving or save more, with only 3 per cent saying they were less likely to save into a pension or stop saving completely. Young people are the most likely group to save into a pension in the wake of the Budget, with 54 per cent saying they are more likely to save. The report also found 42 per cent of lower income respondents more attracted to pension saving.
Shortly after the Budget the NAPF ran a separate member poll asking pension schemes specifically about the proposed ‘guidance guarantee’ service. It found 78 per cent of NAPF DC fund members said they did not understand what the Government expects them to deliver and 57 per cent said they will struggle to deliver the ‘guidance guarantee’ ahead of the April 2015 deadline.
NAPF chief executive Joanne Segars says: “It is encouraging that following the Budget proposals more than a quarter of people are more likely to save into a pension, with younger people and those from lower income households especially motivated to start saving. Interestingly, more than half of those surveyed had a prudent attitude towards retirement income. However, we do need to make sure people are fully aware of the consequences of taking all their pension savings in one go if they do not have any alternative sources of income.