This section of the FCA’s financial live’s survey relating to pensions will be very interesting to behavioural scientists. It suggests that most people are confident about the choice they made but fewer know the choices available and what they missed out on.

I guess its like going to a supermarket but never getting past the first aisle you visit, you may be comfortable you were smart in that aisle but missed the rest of the market. Here is what the FCA’s agenda is…

71% of those who had an opinion on decisions they’d taken (recently) were confident they’d chosen well , and a further 21% weren’t overly worried. There was not an outcry box but a small number said they didn’t know they had choices. In the FCA’s opinion, two thirds of people expressing an opinion showed characteristics of vulnerability ( I think this is FCA speak for saying they weren’t fully up to speed with choices and their implication.

I find the progress over time to be interesting, the orange box (below) has expanded quite a lot at the expense of the burgundy one – that means an uptick in approval for risk-taking to get flexibility rather than certainty has won out over certainty that the money will last.

There is a big difference between the views of those buying annuities, to partially encashing and a different view from those cashing out, but many people wanting security cashed out or made a partial encashment. Maybe this is a characteristic of vulnerability.

But now things start falling apart, if you see keeping it solid as knowing the choices. Not only do people think they know what the choices are delivering but they seem to be comfortable. However when asked questions about the choices they had, they can’t get the answers right. Red lights should be flashing in the FCA’s Stratford HQ – this is chaos!

This is odd as a very small number of those taking their money chose an annuity. Annuities appear to be products that people can get their heads around. It is investment, tax, sustainability and flexibility that get people confused. I am seriously impressed by people’s awareness of what “enhanced annuities”, that is impressive. So why are we so hopeless about pension freedoms?

The reality of this section of the FCA’s Financial Lives report is that people think they know what they are doing but mostly don’t. Not only are they cocky, but they are cocky without reason, which is a very dangerous state of affairs.

That they can work out what an annuity is, even if they don’t choose them, suggests that they are simpler products which get understanding. My gut feeling is that sensible as taking tax free cash on an UFPLS basis, you are not going to get people to choose it – it will have to be in a default. My gut tells me that ask people if they want flexibility and most people will say “yes” when they don’t know what is going on – it means you can make a better decision later on – right?

Well not always, a lot of the decisions that appeared to have been made without a clue of what was being bought have issues down the line – relating to tax, investment and to do with living longer than anticipated.

Frankly we are muppets when it comes to these choices. This is nothing new to this blog, we used to have a muppetometre -sadly, too many of the people we tried it on – scored 100% (see below).