Almost three-quarters of Fidelity pension scheme members take tax-free money before reaching their chosen or default retirement age, highlighting the need for more assistance in the months leading up to the first withdrawal, according to Fidelity International.
The ‘Stepping into Retirement’ report highlights how member engagement and confidence soars during and after crystallisation. Nearly three-quarters of Fidelity members who have received some of their pension have a high or medium degree of engagement, compared to 30 per cent of the company’s overall member base.
Fidelity found that a third of its members under 55 had a ‘good’ score for general financial confidence, according to a study of its members. This number jumps to 51 per cent among over-55s who have not yet taken any money from their pension, and to 70 per cent among those who have taken money from their pension.
Fidelity’s report also looked at members who have pulled money from their pensions, finding that 93 per cent of those who went into drawdown kept their present investments.
Despite an increase in general financial confidence as a result of accessing their pensions, a second Fidelity research study indicated that 45 percent of respondents aged 55 to 75 believe that retirement planning is too complicated to execute on their own. For individuals aged 35 to 54, the percentage rises to 61 percent.
Fidelity International head of pension products & policy James Carter says: “Our Stepping into Retirement report highlights the discrepancy between members’ default or selected retirement ages and the actual dates they start to withdraw their money. As an industry, it is clear we need to think about how we can help members at each stage of their retirement journey, building confidence through strong guidance and support in the run up to retirement. We need to further evolve how members are informed and reminded about reviewing their retirement age, so they are confident they are making the right decisions based on their needs when they first withdraw from their pension.”
Carter adds: “When it comes to advice, we have a role to play in providing affordable and accessible options, either through traditional or lower-cost digital channels, so that members feel more confident in their retirement choices. In addition, we need to think about how we can better support members after they retire, or after they first withdraw money from their pension.
“Clearer rules around how firms can engage with consumers’ personal circumstances – or even a new regulatory concept enabling ‘personalised guidance’ alongside traditional advice – would enable better engagement. Activities could mature from softer, educational messages about saving, to more personalised messages, such as illustrations of how long each member’s pension savings could last. Fidelity is exploring how to share such messages within the current guidelines in a positive and meaningful way, with proactive steps that will help individuals manage their finances throughout their lives.”