PLSA launches detailed study of 55-70 pension provision

Joanne-Segars-700.jpgOf 11.5m people aged 55-70 across the UK, 3.3m have no private pension provision, while 4 m have at least one pension not yet in payment, according to a major survey by the Pensions and Lifetime Savings Association.

Of the 4m who have at least one pension not yet in payment, 2.8m have DC pots while 1.8m have DB pots. The median pot for the 2.8m people between 55 and 70 with a DC pension not yet in payment is £17,500, while the average DC wealth is £85,000.

Of this group, 22 per cent have a DB pension not yet in payment, 28 per cent has a pension already in payment, 46 per cent has a partner who also has private pension provision and 83 per cent have other savings or investments. Amongst this group 16 percent own a second property and 25 per cent still have a mortgage.

The PLSA research identifies three clear groups of people – actioners – early adopters, a distinct and affluent group, many with experience of self-invested personal pensions (Sipps) or income drawdown; investigators – assessing their options, the largest group, with limited experience of drawdown, limited DC savings but largely reliant on DC and other savings for an income in retirement and inactives – the most vulnerable group Many inactives are still working, and this group is the most reliant on their DC savings to provide an income in retirement but have the lowest levels of financial confidence.

The PLSA says the findings clearly warn against placing too much weight on the experiences of the actioners as it’s 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. It is the inactives that speak most clearly of the longer term challenges created by low levels of retirement savings married with the lowest levels of financial confidence, says Pensions and Lifetime Savings Association chief executive Joanne Segars

Segars says: “The message that comes through loud and clear from our research is that there’s no more normal when it comes to deciding what to do with savings at retirement. Pension freedoms have destroyed the traditional norms leaving a blank canvas for millions of people. 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.

“Our earlier research identified the deadlock that’s been created by uncertain consumer demand and an unstable regulatory environment that raises questions about future liability – these have combined to freeze any development in services to help savers make use of the pension freedoms confidently or fully.

“Someone has to map the new pension freedom territory to allow savers to cross it confidently. This research underlines the importance and value of our proposal of quality assured products, a Retirement Quality Mark, combined with strong signposting by trustees and providers to help savers spot reliable products that are likely to work for them – effectively providing a map that clearly shows the various routes available to them.”