Just 17 per cent of the 3.7m individuals aged 55 to 70 with pensions not yet in payment are planning to access their pension savings under the new freedoms in 2015, according to NAPF research.
Most DC savers – 56 per cent of those in the 55 to 70 age group – have yet to make a decision about how they would like to access their retirement savings or are waiting to see how the market develops.
The NAPF estimates that there, of which there are approximately 2.2 million with £175 billion in defined contribution (DC) pension savings.
The research found 81 per cent thought that the freedoms were a great or a good idea, with just 11 per cent considering them to be not such a good idea.
The survey revealed very little appetite for transfers from DB to DC with only 3 per cent of those with DB expressing a clear desire to move their savings.
Among this first cohort of DC pension savers to have access to pension freedoms, 70 per cent of those who expressed a preference wanted to leave all or some of their savings invested and draw a regular income from their investment, with two-thirds expecting to access this through their existing provider or scheme. Just under half – 48 per cent – wanted to take some or all of their savings as cash.
The survey found some appetite for annuities, with 24 per cent of respondents saying that they would like to purchase one with all or some of their savings. Those looking to take their money in the short term were more attracted to the concept of cash than those further off retirement or taking their pensions.
Of those looking to cash in their savings, the majority – 63 per cent – wanted to save or invest it, and spend it gradually. A quarter – 26 per cent – planned to spend in on a holiday, car or another one-off purchase, with just under a quarter keeping the money for their own future health or care needs.
The survey reveals misconceptions surrounding the new freedoms. Of the savers we surveyed who expressed an interest in drawdown, 53 per cent believed that this option would offer them a guaranteed income in retirement, with a quarter believing there were no risks involved. Although many of the cohort surveyed mentioned a financial adviser first and foremost when asked who they would seek advice from, previous NAPF research has shown that most savers are unwilling to pay for advice.
Schemes are acutely aware that their members need support – 96 per cent of DC schemes thought that their members would need either a lot or a moderate amount of support to navigate the new pension freedoms. Most schemes or employers provide some support to members at retirement, help that is now reinforced by Pension Wise.
NAPF chief executive Joanne Segars says: “We are recommending three steps to break this stalemate. In order to stimulate supply in the market, the Government needs urgently to review and seek ways to remove the barriers to innovation. This would help to smooth the route to market for new products and solutions, allowing a greater range of accredited products and increasing consumer choice.
“We need clear, recognisable quality standards for retirement income solutions that consumers can trust. This will allow savers to better navigate the new choices, while schemes and providers would be able to demonstrate quality.
“Once these products have entered the marketplace consumers need to be able to compare and contrast to select an option that best suits their needs. Pension providers and trustees must be able to signpost their members to good quality solutions with confidence. The ability to signpost to good quality products will enable employers and pension scheme providers to support savers effectively through the tricky process of selecting a retirement income solution.
“Taken together, these steps will help to realign the interests of pension providers and savers and fulfil the full promise of Freedom and Choice.”