Six out of 10 pension savers are supportive of the FCA’s new investment pathways according to new research.
Legal & General Investment Management in association with NMG Consulting found 70 per cent of savers under 55, and 60 per cent of potential drawdown users over 65 support the introduction of this initiative.
This FCA initiative sets out a number of defined investment options for those retiring who are not seeking advice. These are based on what people intend to do with their pension over the next five years.
The strongest interest in investment pathways comes from pre-drawdown savers with pot values between £30,000 and £100,000, which represents the majority of the non-advised drawdown market.
Here savers praised the clarity and simplicity of investment pathways, with nine in 10 consumers being able to align at least one of the options to their needs, while 60 per cent felt confident enough to make an independent decision following the guidance they received.
Only 12 per cent of prospective users felt the need for more formal financial advice.
However, more than half of existing drawdown users said the investment pathways are too basic, due to their lack of fund choice; a third of respondents want to choose from a small shortlist of funds, while a fifth would prefer a wider fund choice.
While choosing a single pathway was the most popular strategy for prospective drawdown users (38 per cent), over a third (36 per cent) said they would split their pot between pathways and many said they would migrate between pathways over time, with 60 per cent of respondents saying they would be more likely to do this following an annual review.
That said, the existence of the investment pathways concept alone doesn’t solve the problematic lack of retirement planning, according to the study. Just 44 per cent of prospective drawdown customers say they will actually use the investment pathways.
Inertia remains the biggest barrier to adoption, with 33 per cent of respondents saying they would not move from their default accumulation funds unless prompted.
LGIM head of defined contributions Emma Douglas says: “The positive reception to investment pathways is a promising first step in overcoming inertia at retirement and achieving greater engagement with non-advised members.
The investment pathways go a long way in alleviating anxieties, in particular for non-advised savers who are yet to draw down.
“Digital tools can help bring the pathways concept to life, extending beyond the four simple options to bringing about a greater understanding of the risk and reward of each solution.
“Our research found that members welcome more regular guidance when making decisions on their retirement, with 81 per cent feeling the current 5 year review is too infrequent.”
She adds: “Done well, investment pathways should complement other industry initiatives such as the Pensions Dashboard and also pension consolidation, to give members a single view of their retirement investments and clear information about their options.
“In this way, we can turn the confidence boost that investment pathways deliver into meaningful action which delivers better retirement outcomes for savers.”
The survey was conducted among 1,200 non-advised existing and prospective drawdown users.
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