Dash for retirement cash slowing as consumers take more time to explore options
01 June 2015
After an initial dash for cash following the introduction of pension freedoms in April, customers are taking more time to consider their options and making increasing use of the Government’s Pension Wise service, Scottish Widows has reported.
From the initial surge at the beginning of April until the middle of May, Scottish Widows has seen a 72% drop in full pension encashment requests. In the last couple of weeks, full pension encashment requests accounted for 50% of customer intentions compared to more than 70% in the first few weeks of pension freedoms.
With around a fifth of its customers eligible under the new freedoms, the average size of pot being cashed in full was less than £20,000. 85% of requests were for pots less than £30k.
While requests for full encashment have cooled, customer demand remains very high, with an increasing proportion of customers wanting to have detailed conversations about their pension freedoms options, including drawdown and partial pension encashment.
Scottish Widows has also seen a significant increase in customers going to Pension Wise in advance of contacting the provider, with 3% in the first week rising to a third within a month of 6th April. The provider received a call every 10 seconds on average during the week beginning 6th April and has also recorded an unprecedented surge in online engagement with more than 110,000 hits to its digital Retirement Planning site to date.
Over the last few weeks, interest in exploring other retirement income options has increased significantly and for the first time these request have now over-taken the volume of customers simply looking to cash in their pension. The complexity of these options has necessitated longer call lengths with some of the most complex options taking over an hour to complete.
Robert Cochran, Retirement Expert at Scottish Widows, said: “Although our data has shown an increase in Pension Wise awareness, there is still work to do in closing the knowledge gap and encouraging people to use the service to become better equipped to make the right decisions for their financial future.”
The lack of understanding was highlighted by recent research from Scottish Widows that found 79% of 50-59 year-olds were unaware of the government’s Pension Wise service and a further 38% unsure where to go for guidance.
The study of 5,000 UK adults carried out in March revealed two thirds (64%) of 50-59
year-olds felt the changes have not affected when they plan to take their retirement income and one in three (33%) respondents feel the reforms won’t make a difference to how people save.
Robert Cochran added: “It’s still too early to draw definitive conclusions about the longer term impact of pension freedoms due to the pent up demand of those who deferred until April 6th to access their money.
“The watershed for us has been how popular the tools on our Retirement Planning site have been with our customers to better understand their options and tax implications without rushing in. However, our site activity data also tells us that customers are still looking for more help in making the right decisions given the wide range of options now available to them.”
For further information please contact:
Kimberley Hamilton, Scottish Widows, 07557 257 298 email@example.com
Kevin Brown, Scottish Widows, 07500 910 904 Kevin.firstname.lastname@example.org
Note to editors:
- Survey conducted online by YouGov of 5,191 adults between 31st March – 8th April 2015 (figures weighted and are representative of all UK adults aged 18+)
- Visit the Scottish Widows digital Retirement Planner