Government must act quickly to encourage a pensions market which meets the need of all savers
The National Association of Pension Funds (NAPF) today (Thursday) published new research commissioned to understand what the 2.2m* people aged 55-70 with approximately £175bn in defined contribution (DC) pension pots not yet in payment plan to do with their savings under the new Pension Freedom reforms1.
The research found that 70% were attracted to the idea of drawdown. This implies a potential market of 1.5m investors and between £50bn to £100bn in assets. Of particular note was that even among those with smaller pots (less than £25,000) the majority (54%) were attracted to the idea of drawdown2.
Joanne Segars, Chief Executive, NAPF, commented:
“While all savers can still transfer their pot from a scheme or buy an annuity, many are understandably frustrated at what they perceive as a lack of the promised flexible options, such as drawdown. It’s easy to see the appeal to savers of drawdown − it offers flexibility, control and investment growth. But what’s concerning are the assumptions that many people have about drawdown: just over half (53%) of the people we asked believe drawdown will offer a guaranteed income and one quarter (25%) thought that drawdown carried no risks at all.
“The NAPF and our members want to see all pension savers, including those with smaller pots, offered the full freedom and choice promised to them by the Chancellor in his 2014 Budget. For this to happen we have to see a market develop that works for all savers, with products that are transparently priced and offer value for money, designed to help savers navigate the twenty or thirty years during which they will rely on their pension savings. These products will need to be well run and clearly communicated to customers.
“The plain truth is these products aren’t yet freely and readily available for savers with small pension pots. Government must act now to encourage a pensions market that works in the interest of all savers including those with smaller pension savings.”
To help achieve this Government must take three steps:
Government must ensure there are no barriers to a market where good value products are available to savers with pots of all sizes, large and small.
Support the development of standards by which trustees can evaluate whether products offer quality and value for money to their members.
Company pension schemes and Pension Wise must be enabled to clearly signpost savers to the products that meet these standards.”
Notes to editors:
Footnote 1: The Government’s Pension Freedom reforms were launched by the Chancellor George Osborne in his 2014 Budget.
Footnote 2: Preferences for drawdown (among those with an opinion)
- 54% of respondents with under £25,000 of DC wealth showed a preference for drawdown
- 60% of respondents with £25,000-£100,000 of DC wealth showed a preference for drawdown
- 87% of respondents with £100,000+ of DC wealth showed a preference for drawdown
About the research In February the NAPF commissioned Critical Research to undertake a survey of 1,041 savers aged 55-70 who had a pension not yet in payment; findings were weighted to be nationally representative.
All respondents with a DC pension not yet in payment were asked how they were likely to access their pension pots.
*Estimated population figures for the number of people with DC pensions not in payment are grossed figures. The gross figure is calculated through taking the final weighted results and applying to the Office for National Statistics 2011 Census, Population and Household Estimates for the United Kingdom.
The NAPF is the voice of workplace pensions in the UK. We speak for over 1,300 pension schemes that provide pensions for over 17 million people and have more than £900 billion of assets. We also have 400 members from businesses supporting the pensions sector.
We aim to help everyone get more out of their retirement savings. To do this we spread best practice among our members, challenge regulation where it adds more cost than benefit and promote policies that add value for savers.
Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]
Eleanor Bennett, PR Manager, NAPF, 020 7601 1718 or 07825 171446, [email protected]
Kathryn Mortimer, Press Officer, NAPF, 020 7601 1748 or 07901 007713, [email protected]