I had the revelation last week of the source of the 162 slides that I have been working through which form the “pension” part of the FCA’s 2024 Financial Lives report.

I have written about how I found out the source and several people have been in touch with more detail. I will allow him to remain anonymous unless he wants to reveal himself, we should be thankful to him and to the FCA for commissioning him.

This section deals with what people know when they are choosing how to take their money.

I am returning to these slides because I enjoy so much their narrative. We are dealing here with a behavioural failure where savers believe they are on top of their decision but are confronted by the depth of their ignorance. First the self confidence…

People who took decisions were generally proud of what they had done and had a high regard for their understanding of their choices.

Those who used annuities and drew down could explain what they had done in terms of protecting themselves (annuities) and giving themselves financial flexibility (freedom from pensions). What springs out to me is that the balance between pro freedom and pro annuity people varies as you would expect in line with what people did, but those who took full encashment have a very different view from those who partially encash. 10% of them say they are going to blow their pot early while more speak of pensions in terms of lifetime certainty (the purple box) than those who “draw down”. This suggests that many people who cash their pots in see their “pension” as anything but a pension.

Here is the worry for Government and Regulators, a worry for years ahead when people will remember they had saved into what was called a “pension”. People who were confident they made good choices got into a terrible tangle over what annuities did and nearly a quarter owned up to never having heard of an annuity.

12% of people questioned thought that “drawdown” guaranteed you a pension and nearly a third thought you got 25% of income as tax-free (some confused awareness about UFPLS).  The same number of people hadn’t heard of drawdown as annuities and only the idea that drawdown guaranteed you nothing got any kind of consensus (still less than 50% of people understanding this). This is a really shocking indictment of the MaPS endeavour, the Government has failed to get the public awareness anywhere near where it should be, 10 years after throwing the gates to freedom open.

Here is the irony’s final twist. People get “longevity”. They know about the factors that limit life expectancy and so understand “enhanced annuities”. Longevity, when explained in terms of diabetes, high blood pressure and obesity makes sense of financial life. People who live long get a good deal, people who die soon don’t. People get this , the final irony is that most people don’t take out enhanced annuities. My suspicion is that most people have a low expectation of living long but don’t want to put conviction behind this so sit on the fence, it is a grim chaos which people say they are on top of , but of which they have little grasp.

It really is time people got some help, this is the nastiest problem in finance and this is the mess that results.