58% agree, or strongly agree, that members will take UFPLS benefits from schemes and reinvest the realised funds in other tax-efficient products such as ISAs.
64% believe that schemes should offer the ability to take multiple UFPLS payments in order to allow members to take benefits without crossing tax thresholds.
82% believe that members will take a more flexible approach to retirement going forwards and expect to take some benefits from pension schemes during a period when they will continue to work at least on a part-time basis before they fully retire.
However, there was also an acknowledgement that the industry is a long way from having the products available to meet their customers’ retirement needs.
42% of respondents disagree, or strongly disagree, that the existing range of retirement products can adequately meet the needs of the UK market for the next five years.
Moreover, 58% agree, or strongly agree, that trustees feel the industry providers are not adequately geared up to deal with recent pension reform with 34% believing that members do not expect to be able to execute a full drawdown from their existing scheme, instead expecting to set up separate drawdown vehicles. In addition, 58% believe that pension schemes have been slow to adapt default funds to reflect the new freedoms and the reduced reliance on annuity products.
Regarding annuity products, the research revealed that 46% of respondents believe that annuities will no longer be the first product of choice as an individual begins to plan and move into retirement. 68% agree, or strongly agree, that the increase in the average pot size purchasing an annuity is due to small pots increasingly being taken as cash.
30% agree, or strongly agree that the inclusion of new features for annuity-style products to permit variation in lifetime income levels and unlimited guarantees adequately adapts these products for the new pension freedoms.
Further findings were:
- 72% believe that traditional drawdown products no longer meet the requirements of the marketplace as there is a need for different pricing models to allow for smaller pot sizes.
- 64% believe that drawdown products now form part of all retirement conversations, with 78% agreeing, or strongly agreeing that drawdown should now be given an equal profile to annuities as an alternative product.
Nigel Pearce, Life and Pensions Director, Equiniti, said: “Those with small pension pots are increasingly using the new freedoms to take their whole pots as cash, regardless of the tax implications, to use for a multitude of purposes. The vast majority of respondents agreed that people will continue to draw cash sums over and above their tax-free allowance.
Whilst there are a few who are looking to manage their cash assets, many are simply using them to pay off debts or to make a significant purchase, such as a car. The average DC fund size is only £30,000. It is those with larger DC funds that are likely to be taking independent financial advice and therefore fully understand all of the tax implications involved.”
Notes to Editor *About the Survey:
The Annual Retirement Survey 2015 is the sixth such survey issued by Equiniti. It was carried out between 28 May and 22 June 2015, seeking the views of professionals throughout the Annuity industry, including product and service providers, retirement planning consultants, employee benefit consultants, regulators and influential bodies. For 2015, 50 responses were received from renowned annuity professionals and commentators within a one-month period.
Notes to Editor About Equiniti:
Equiniti keeps things running smoothly behind the scenes for some of the best-known brands and public sector organisations in the UK.
We specialise in providing finely-tuned finance and administration services, as well as smart technology solutions, in complex and regulated markets.
Our services are delivered by 3,500 employees across 29 office locations, enabling us to offer solutions that are flexible, adaptable and scalable.
We are acknowledged leaders in the pension services market and in the share registration market, where our clients include around half the FTSE 100.
Our mission is to make the complex simple. www.equiniti.com