The silent majority aren’t drawing down anything!

The proportion of full cash withdrawals and annuity plans sold with advice in the second half of 2017/18 fell to its lowest rate since the second half of 2015/16. This means that an increasing proportion of pots accessed through an annuity or full cash withdrawal are non-advised. The proportion of pots first entering drawdown where advice was used has remained at 69%. Therefore, just less than a third of drawdown sales are still non-advised.

We are interested in monitoring non-advised drawdownsales because of the risks to consumers of managing drawdown. This has been highlighted in the final findingsfrom the Retirement Outcomes Review . We found that 1 in 3 consumers who have gone into drawdown recently are unaware of where their money was invested. It also found that some providers were ‘defaulting’ consumers into cash or cash-like assets. This is highly unlikely to be suitable for someone planning to draw down their pot over a longer period, as they are likely to lose out on investment growth.

FCA drawdown data

The FCA’s research is excellent as far as it goes, data comes from providers which the FCA reckon cover 95% of the contract based market.

But there is – as yet – no data from the parts of the market where pension freedoms are available but the FCA holds no sway, as the FCA admit

 It does not include trust-based workplace pension schemes or defined benefit schemes, which make up the majority of assets in the workplace pensions savings market and serves the largest number of scheme members.

And here’s the problem. The FCA is set up to control advisers and protect consumers where advice is given. But we know that 94% of us don’t regularly take advice.

With the numbers that the FCA are displaying there is an inbuilt bias, because contract based pension plans are (largely) advised products, the provisions of pensions direct to a consumer is rare (one thinks of Hargreaves Lansdown and struggles after that).

So the “problem” that the FCA have identified with “non-advised drawdown” – covers only the advised end of the market. What’s happening with most workplace pension pots , AVCs and the pots coming out of non-insured trust based DC plans, is not on the FCA’s radar.

This large proportion of retirement savings is not only not under analysis, it’s not under advice (save for a small part that advisers include in holistic planning).

Whatever problems the FCA are identifying in the advised part of the market, are likely to be amplified in the non-advised part of the market.

And what of those who have pots but no pension?

It is great to know what is going on – the FCA have helpfully included the data tables behind the words and info graphics and it’s clear that there is plenty going on


But the 1.839,794 pots accessed so far only represent a small portion of the pots out there. We just don’t know how many pots there are – though the DWP tell us that there will be 50,000,000 abandoned pots by 2050 (at the current rate of growth).

In a press release yesterday, NOW Pensions pointed to further data published this week by the Office on National Statistics

“One of the side effects of auto enrolment will be an explosion in the number of preserved pension entitlements. The ONS data shows that this is already happening with an increase from 11.2 million in 2016 to 11.6 million in 2017. This underlines the needs for the Pensions Dashboard which would help people keep track of their growing number of pension savings.” – Troy Clutterbuck

The problem is that we don’t know what is going on in the minds of the people who are not drawing down, but have preserved pensions (abandoned pots). We don’t know much about these people because they form what Bernard Levin called “the silent majority”.

These are the 94% of people not taking advice and they will be the people with the abandoned pots and little or no help (not even pension wise which is doing good – but not on the industrial scale needed).

This is why we need tPR and FCA working together on this and this is why Guy Opperman needs to get to the Treasury to explain that without some kind of default way of spending our pension pots, these pots will continue to be preserved, abandoned, unadvised and ultimately useless!

I have suggested that CDC may be a way for the silent majority to find a default way of getting their money back, That is a solution for the future. In the short term – we need to give people help in finding their pensions and – once found – help in what to do with what they’ve saved.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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