My conclusion from reading Corporate Advisers report on DWP’s latest research is that the happiest of retiring savers today are being paid a defined benefit.
The happiest in future will come from those who are on their way to a CDC “wage for life”. If they can get saving for a pension , as quick as regulation will allow them, then good for them
Authorisation gets underway for whole of life schemes in just under three weeks and at last any employer can take the burden of doing their own pension away from them and replace the burden with what they thought they were getting – “deferred pay”.
The DWP have discovered that what British citizens are capable of doing, does not extend to choosing a way to decumulate from their pension fund
Knowledge of drawdown, annuities, fees, charges and investment risk was generally low among ordinary retirement savers, with many struggling to differentiate between products or assess long-term implications, according to research by the Department for Work and Pensions.
This research explored how individuals aged 53–67 understand, approach, and make decisions about pension decumulation. It focused specifically on how people choose when and how to access DC pension savings in a landscape where individuals now bear more responsibility for decision-making compared to DB pensions.
According to the DWP, people accessed pensions for a range of reasons, including reaching state pension age, health or work changes, bereavement, divorce or to supplement income. Health and caring responsibilities were particularly influential, pushing some towards early or unplanned retirement, meaning respondents were accessing pensions sooner than planned.
Understanding of pension access routes also varied considerably. The 25 per cent tax-free lump sum was the most widely understood and often the only option respondents felt confident about.
Kelly Parsons, head of DC proposition at consultancy Broadstone, says: “The findings lay bare a persistent knowledge and confidence gap among savers, with many people reaching key retirement decisions without the understanding or support needed to make informed choices.
“Better engagement and earlier financial education are essential if savers are to understand not only the options available at retirement, but also the decisions they can make throughout their working lives to improve their financial resilience, especially as individuals begin to take greater responsibility for managing their DC savings.”
I suspect the DWP is on the side of whole of life solutions that take the decisions away from these poor uneducated savers.
The DWP findings were based on 55 qualitative interviews with a diverse group of respondents varying in income, health, pension pot size, employment histories and family circumstances.
Perhaps next time they could look for diversity of education. But then again
Even if these interviews included well educated folk like Andy..
I’m not sure that they’d be able to DIY what Bill Sharpe called the nastiest hardest problem in finance.
Of course, I too am baffled by the choices that DC pensions present me at retirement. This DWP research says that pensions are too hard for you and me.