PLSA reveals first trends of retirees using their pension freedoms

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The Pensions and Lifetime Savings Association has for the first time revealed exactly how pension savers are using so-called freedoms with their pensions – and it finds most pensions decision makers are not as quick to cash-in as previously thought.

Data it has analysed for the first six months of the freedoms reveals that of the four million people with pensions between the ages of 55-70, there are still 2.8 million with at least one DC pot still not yet in payment.

Of these 2.8 million, the association identifies three distinct ‘types’ of pension saver – those who are ‘Actioners’, ‘Investigators’ and ‘Inactives’.

The first are affluent first movers – those who have experience with self-invested personal pensions (SIPPs) or income drawdown. The second are assessing their options, but have limited DC savings, even though they will be largely reliant on it for their retirement income. The last group are the most vulnerable, have the most reliance on their DC savings but have the lowest financial confidence.

According to the research, its the ‘investigators’ who comprise the largest of these 2.8 million, while the ‘inactives’ pose the greatest challenge for employers to engage with.

Joanne Segars, Chief Executive, Pensions and Lifetime Savings Association, said: “Our research reveals the deadlock that’s been created by uncertain consumer demand and an unstable regulatory environment. Someone has to map the new pension freedom territory to allow savers to cross it confidently.”

She said: “Pension freedoms have destroyed the traditional norms leaving a blank canvas for millions of people.'

She added: 'This first cohort of savers are effectively pension pioneers – working out how to make the right decision with their savings but at the same time they naturally fearful of making a poor decision in such uncharted territory.”

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