Three distinct consumer responses to pension freedoms have emerged since their introduction this April, according to National Association of Pension Funds (NAPF) research unveiled at the association’s annual conference in Manchester.
The NAPF described its research, which asked 24 people to keep pension ‘Lifelogs’ over the summer to produce a qualitative picture of the population's reaction to pension freedoms, as "the first authoritative assessment of the difference it has actually made to people at retirement". The research also involved a qualitative survey.
It found that people broadly fell into the three categories of: those who had maximised their income and, in the words of NAPF director of external affairs Graham Vidler were “likely to have more complex finances”; those who had capitalised on the opportunity to some extent, perhaps by drawing a small sum from their pension pot; and those who had investigated the options but done nothing after discovering a concerning level of complexity.
“It’s the bottom group that is the most worrying,” said Vidler. “Doing nothing might be fine for the moment because maybe they’re at an age where they don’t need to draw out of their retirement income. But we as an industry need to help them use their retirement pot how they might want to.”
Vidler highlighted an entry in one of the qualitative Lifelogs, which stated the concern that “more freedom means more opportunity to get it wrong".
The NAPF research also investigated the most commonly relied on sources of pensions advice. “Most prevalent were personal and informal sources of support,” said Vidler. “Just about everyone we spoke to is doing their own research, combining what they hear in the media with discussions with friends, then working with their families to go through the details of how it applies to them.”
Vidler reported worryingly low levels of engagement with the government’s Pension Wise advice service. No-one mentioned this in their Lifelog, he reported, with only 21% who had actually taken action in relation to the pension freedoms having engaged with Pension Wise, and only 9% of those who were investigating the new freedoms.
“It’s a problem of awareness and knowing 'this is there and could be useful to me in my particular circumstance',” said Vidler. “We need to raise awareness because it’s a service not being used by people who in most cases could use some expert advice.”