Following a survey carried out by consumer group Which? less than a quarter of consumers, 23%, said they trusted long-term financial products, such as pensions. This was lower than trust in day-to-day banking, at 40% and energy companies at 30%. A rather shocking finding for the financial services industry!
Which? surveyed 255 over-55s who had accessed their pension pots since pension freedoms came into effect.
The research found many of these savers became daunted and confused when it came to making a decision about what to do with their retirement savings, leading to inertia in some cases.
Pension legislation has changed so much over the last couple of decades that consumers definitely have a pension “knowledge gap” which leaves them lacking detailed knowledge about the pension options available to them. Many consumers do not shop around when they get to retirement because they feel it is easier to accept what their current provider is offering. Little do they know what they are missing out on as the table below shows:
Not only is it possible to often improve the annuity figures by having an Independent Financial Adviser (IFA) research the market on your behalf. But they can also take into consideration any health or lifestyle issues which may qualify you for an enhanced annuity which offers even better terms.
Since April 2015, when new pension rules were introduced, £10.8bn has been withdrawn from pensions.
According to an FCA study published in July 2017, almost three quarters, or 72%, of pension pots that have been accessed are by consumers under 65.
The most popular option has been to fully withdraw the pot, with 53% of pots fully withdrawn between October 2015 and September 2016.
The FCA also found that consumers who access their pots early without taking advice typically follow the “path of least resistance”, accepting drawdown from their current pension provider without shopping around.