1st June 2015
Following an initial dash for cash on the back of the introduction of the pension freedoms, customers are now taking more time to consider their options and are even using the Government’s Pension Wise service, according to Scottish Widows.
From the initial surge at the beginning of April until the middle of May, the insurer has witnessed a massive 72% drop in full pension encashment requests.
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, while 85% of requests were for pots worth less than £30,000.
However customer demand remains very high, with an increasing proportion wanting to have detailed conversations about their 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 6 April. The provider received a call every 10 seconds on average during the week beginning 6 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.”
However the lack of understanding was highlighted by recent research from the group 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 of 50-59 year-olds felt the changes have not affected when they plan to take their retirement income and a third felt the reforms will not make a difference to how people save.