Dash for retirement cash slows as consumers take more time to explore options
From the initial surge at the beginning of April until the middle of May, the firm has seen a 72% drop in full pension encashment requests.
In the last couple of weeks, full pension encashment requests accounted for 50% of customer intentions compared to more than 70% in the first few weeks of pension freedoms.
With around a fifth of its customers eligible under the new freedoms, the average size of pot being cashed in full was less than £20,000. 85% of requests were for pots less than £30k.
While requests for full encashment have cooled, Scottish Widows said customer demand remains very high, with an increasing proportion of customers wanting to have detailed conversations about their pension freedoms options, including drawdown and partial pension encashment.
The insurer has also seen a significant increase in customers going to Pension Wise, with 3% in the first week rising to a third within a month of 6 April.
Over the last few weeks, interest in exploring other retirement income options has increased significantly and for the first time these request have now over-taken the volume of customers simply looking to cash in their pension. The complexity of these options has necessitated longer call lengths with some of the most complex options taking over an hour to complete.
Robert Cochran, retirement expert at Scottish Widows, said: “Although our data has shown an increase in Pension Wise awareness, there is still work to do in closing the knowledge gap and encouraging people to use the service to become better equipped to make the right decisions for their financial future.”
The lack of understanding was highlighted by recent research from Scottish Widows that found 79% of 50-59 year-olds were unaware of the government’s Pension Wise service and a further 38% unsure where to go for guidance.
The study of 5,000 UK adults carried out in March revealed two thirds (64%) of 50-59 year-olds felt the changes have not affected when they plan to take their retirement income and one in three (33%) respondents feel the reforms won’t make a difference to how people save.
Cochran added: “It’s still too early to draw definitive conclusions about the longer term impact of pension freedoms due to the pent up demand of those who deferred until 6 April to access their money.”