Just over a quarter (27%) of those surveyed intend to spend some of their money on general expenditure, treating themselves or on home improvements, unsecured debt and mortgages.
Those approaching retirement are well aware of the need for their money to be used to fund an income, with 67% of respondents factoring certainty of income in to their retirement decisions. Annuities, however, will not be the preferred option for those looking to do so, with only 28% of respondents planning to purchase one. Tax efficiency is the second most important consideration for consumers when deciding how to use their pension pot, with 61% likely to factor it in.
45% of consumers are looking to use their pension pot to draw an income by using a drawdown product, while 32% of respondents intend to invest some or all of their pension pot. Of these, 39% of these would like to invest through online platforms and brokers and 17% want to buy an investment fund through an independent financial adviser. Less than half of respondents (45%) will consider likely investment risks during their retirement planning
Jonathan Howe, Insurance leader at PwC, commented:
“At this early stage, drawdown products have clearly emerged as the preferred option for those looking to secure an income in retirement, but taking the money and investing is also being considered by many. The diversity and complexity of these new options means people are in danger of being caught out by unexpected costs. Despite extensive publicity, over a third of people are not currently considering tax efficiency, and over half are not considering investment risks, when deciding how to manage their pension pot.
“This survey highlights that many customers are keen to take control of their retirement planning and be more proactively involved in investment and savings decisions. With the right guidance, and affordable advice models, we could see a more engaged and financially literate population emerging as a consequence of these reforms.
“Providers are in the very early days of both giving guidance to customers and developing new products they hope will engage this new market by meeting both their needs and wants. There is a huge opportunity for pension providers and insurers who respond to this rapidly changing, customer-centric, environment.”
Raj Mody, PwC Head of Pensions Consulting, said:
"It's clear from this survey that consumers are open to a range of options for how to use their retirement finances. However, savers should weigh up their options carefully before drawing down pension savings, and incurring tax on them, as they would not generally be able to return their funds to a tax-privileged shelter once they have taken their money out. Also, if further flexibilities for annuities already in payment are introduced next year, for some people it may be sensible to wait until they know their full set of options, if they can, rather than make short-term decisions now in a rush."
