National research tracking the actions of UK pension planners imminently affected by the April 6th pension reforms has unveiled 73% of those aged 55+ (and financially eligible) have chosen not to withdraw any funds since the freedoms became available. This is despite 60.4% of the same survey sample intending to do so in April, 2015 - before the reforms went live. The data directly compares how the sample of 2,003 pension holders received the reforms in April, 2015 vs how a target audience of 503 savers (from the original sample), aged 55+ and now fully able to access their funds, actually responded in June, 2015. Avacade Future Solutions has unveiled a 50% fallout between saver’s intentions and their actions in the three months since the launch of the reforms. The report also reveals a staggering 18% of pensioners do not have a financial plan in place and are unsure about the best action to take.
The below data is sourced from an identical survey sample, charting saver intention in April, 2015 vs saver actions tracked in June, 2015.
The intentions and actions of those taking a cash lump sum are as follows:
- 21% intended to put the money into a savings account vs 3% who have
- 13% intended to invest all or some of their pension (excluding property) vs 2% who have
- 13% intended to go on holiday/ travel vs 2% who have
- 9% intended to invest in property or pay off a mortgage vs 1% who have
- 8% intended to use the money to improve their standard of living vs 1% who have
- 7% intended to purchase a new car vs 1% who have
- 5% intended to use it to support their children (e.g. with university fees/deposit for a house) vs 1% who have
- 3% intended to purchase a property vs 1% who have
- 2% intended to donate to charitable causes vs 1% who have
- 1% intended to educate themselves i.e. study for a degree/ take part in a training course vs 0% who have
- 1% intended to purchase a luxury item vs 0% who have
The divergence that stands between pension planners’ intentions and actions highlights an overwhelming lack of consumer confidence, a shortfall that is significantly impeding the decisions of a population that - according to their financial intentions three months ago, welcomed the reforms with positive purpose. Previous research commissioned by Avacade further analysing saver intention around the reforms revealed that 47% of pension planners cited a lack of understanding around the new freedoms as the main reason why they did not act on the changes. Further challenges ranged from a lack of funds, to a fear of running out of money in their retirement. Over one in ten UK pension planners did not feel they had received sufficient guidance in order to make a wise decision, with 13% concerned they will make an irrecoverable mistake.
M Hoskins, a pension planner, discusses her sentiments on the reforms:
“As someone nearing the point of retirement, deciding how I will spend my pension has been at the forefront of my mind since the reforms took place, especially due to all of the reports and articles in the news. That said, I’ve never been a great saver, so whilst tempting, I am worried about tapping into my pension, taking out a cash lump sum and not leaving enough money for the rest of my retirement.”
Lee Lummis, CEO of Avacade commented:
“The disparity that stands between pensioner intentions versus their actual actions is shocking, and the reason behind this is something we encounter on a daily basis. The difference from 60% planning on taking out a cash lump sum to just 9% doing so highlights that the effect of the reforms is being hindered as many pension planners are confused by the changes and cannot decide the best route to achieve their pension objectives. We work with the critical mass of the UK workforce, people that have worked relentlessly their entire life, yet simply have not had the capacity to prioritise later life planning due to present-day commitments. The majority simply do not have plentiful savings, put away years in advance, and therefore fear any financial action that could hinder what they already have. The findings of the research highlight a public that requires strategic support to navigate the pension deficit the majority are heading towards.”