More pension option contact urged
The majority of people approaching retirement say they have not yet been contacted by their pension provider ahead of the new freedoms coming into force tomorrow, research has found.
PwC surveyed more than 1,200 people aged between 50 and 75 years old last month and found that fewer than four in 10 (36%) had been contacted by their pension provider about the new retirement options available.
People with lower amounts of wealth and smaller pension pots were less likely to say they had been contacted by their provider. Just 26% of people in this category, who have total household wealth of less than £300,000 and a pension pot of less than £40,000, said they had been contacted by their provider. Just under one third (32.6%) of UK households have smaller amounts of wealth at this level.
Just under half (45%) of people surveyed said they are planning on approaching their pension provider for additional guidance.
Customers tended to rate the quality of communication of pension providers as equal to that provided by other service providers such as banks, HM Revenue and Customs (HMRC) and utility companies, according to the research.
PwC said the findings suggest that either providers have not contacted their customers, or that their messages are not hitting home and have been dismissed by their customers as irrelevant.
The reforms will enable people aged 55 and over with a defined contribution (DC) pension to use their pension pot how they wish, subject to their marginal tax rate in that year. They will no longer be required to use their pension pot to buy a retirement income called an annuity.
Annuities have been controversial due to falling rates and people not shopping around to get the best deal, although the payout that they guarantee does mean that the retiree will not run out of cash, as the payouts usually continue for the rest of that person's life.
Everyone eligible to take up the freedoms will be offered free, impartial guidance under the branding Pension Wise.
Concerns have also been raised about the potential pitfalls that some people will need to be wary of, which could potentially lead to them running out of cash too early, or falling prey to a pension scam, or not realising that they could be pushed into a higher tax bracket if they want to cash in a large chunk of their pension pot.
Jonathan Howe, head of insurance at PwC, said: "Many pension providers are concerned about a huge inflow of customer requests come April 6 and these figures suggest their fears are well-founded with nearly half of respondents naming their providers as a source of information they intend to tap into.
"With less than 40% of people believing they've been contacted by their insurer regarding the new pension rules, insurers need to do much more than they have to date in providing information to their customers.
"The pressure facing pension providers is even more stark when you consider the very large numbers of low-wealth, small pension pot-holders who have made or received no contact so far and will be looking to their pension provider, along with financial advisers, as a main source of information.
"Either pension providers are not yet contacting their customers or the contact they have attempted has been dismissed as irrelevant. This raises questions about the quality of customer interaction made by pension providers."
Mr Howe said that after a year of highly-publicised reforms and huge changes for both the industry and consumers, "one might expect the quality of pension provider communication to be above and beyond that of other sectors and this is not the case".
Yvonne Braun, director of long-term savings policy at the Association of British Insurers (ABI), said: "It is important to remember that the reforms do not apply to anyone aged under 55, and insurers have been working flat out to be ready to help those customers who may be affected by the changes, deploying more than 2,000 additional staff.
"April 6 is not a deadline to act, but the start of the new freedoms. People should take time to carefully consider their options, speak to their pension provider and most importantly, use the free impartial Pension Wise service."
A Treasury spokesman pointed out that it has been made compulsory for providers to point people to Pension Wise.