Sponsored by: New Choices, Big Decisions Exploring Consumer Decision Making and Behaviours Under Pension Freedom and Choice ACTIONABLE, INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM
RESEARCH METHODOLOGY We wanted to understand members’ ‘normal’ decision making behaviour WHO’S IN? WHO’S OUT? People aged 55 to 70, who expected to make a retirement income decision from a DC pension pot within 3 months Group and individual scheme members, but weighted towards group schemes People who currently have an adviser, those who have used an adviser in the past, and those who have never used an adviser Those with a combined pot over £ 250 k or a combined pot of less than £ 30 k Those with DB entitlement which would be more than 60% of expected income Those planning to downsize to fund the majority of their income needs in retirement Those with more than two buyto-let properties INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 2
RESEARCH METHODOLOGY Our longitudinal study is a very rich data set 1. BEFORE THE DECISION Explore intentions, analyse needs & motivations, and collect baseline date, e. g. Ø Demographics. Ø Background on their finances. Ø Importance of pension to financial well-being. Ø Baseline knowledge of the changes, include tax rules. v 30 minute depth interviews with 110 people intending to do something with their pot 2. DURING THE DECISION 3. AFTER THE DECISION Explore journeys as people navigate pension freedoms: Detailed examinations of the final decision made via a depth interview: Ø Options explored? Ø What drives behaviours? Ø What information has been sought and at what stage? Ø Why did/did not seek advice? Ø Feelings about the process? Ø 80 active diary v Useful interventions? Ø participants a decision? Triggers for v 500 diary posts & 80 video blogs, spanning 8 months INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM Ø Rationale for final decision? Ø How this differs from initial intentions? Ø Feelings about the process? Ø What would they do differently if they had their time again? v 1 hour depth interviews with decision makers 3
WHAT IS DRIVING MEMBERS’ BEHAVIOUR? Pensions now feel very different After a brainstorming session with the lads in the pub recently, one suggested www. pensionwise. gov. uk. Male, 60 years old, diary entry INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 4
WHAT IS DRIVING MEMBERS’ BEHAVIOUR? Messages they are picking up makes them feel like they should be doing something with their pension money Place Holder for Video Montage INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 5
WHAT IS DRIVING MEMBERS’ BEHAVIOUR? People want to make sensible decisions… It’s a very serious matter. If I muck up at 60, I muck up for the rest of my life, I've got to get this absolutely correct and that’s the problem. It’s a minefield. Male, 64 years old, final decision interview …but, fundamental human nature makes this difficult INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 6
DECISION MAKING IN PRACTICE Plethora of information available, but people struggle to navigate to information that is pertinent to them Too much information – who to trust? Most sources give the same factbased information on options. No consistent terminology – am I reading the same thing? I have decided that I have done so much research that a) I don’t need financial advice and b) I could probably become a financial adviser myself! One size fits all – difficult to relate what they are reading to their circumstances. Worried about the ‘unknowns’ – what am I missing? INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 7
DECISION MAKING IN PRACTICE Good awareness of the Pension Wise service… I logged onto Pension Wise, and was pleasantly surprised. It talked in plain English and was easy to understand. It was easy to navigate. Gave advice on tax, scams, and adjustable income, which I did not know about. I would use this again for reference, although I don't want to have an interview. Female, 56 years old, diary entry I’ve been out all day in the car with my husband we were listening to Heart FM and it kept advertising the new website for info on pensions called Pension Wise. Female, 60 years old, diary entry INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 8
DECISION MAKING IN PRACTICE Very few booked an appointment with Pension Wise, but it was highly valued by those that did 4 in 10 visited the website… …but, just 1 in 10 had an appointment Doubt it would tell them anything new, especially as they cannot offer advice A free consultation with a financial advisor is a better use of their time Not sure about the quality of the advisers, based on what they had read in the press Saw a Pension Wise advisor yesterday. . . I was impressed. . . He spoke in a calm manner, didn't use a lot of jargon and also responded appropriately after realising that I knew some things about my options, and didn't treat me as a complete pension novice… All in all, 45 minutes well spent and I'd recommend taking the opportunity of the free appointment. Female, 60 years old, diary entry INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 9
DECISION MAKING IN PRACTICE Few used a professional adviser, beyond the initial consultation Some had poor ‘advice’ experiences in the past Some did not know where to go to find someone they can trust A few were nervous of appearing stupid if they did not understand what the adviser was telling them Some were surprised and disappointed to find out that advisers were reluctant to take on their business Many were simply put off by the cost - especially those with smaller pots INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 10
DECISION MAKING IN PRACTICE People are feeling overwhelmed by the task and are worried about making the wrong decision Place Holder for Video Montage INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 11
WHAT DID THEY DO? Cash The best laid plans of mice and men… Q. What do you intend to do with your pot? 41 of 80 7 Drawdow n 10 10 of 80 Income? Annuit y 41 22 of 80 INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 7 of 80 22 15
WHAT DID THEY DO? Cash The best laid plans of mice and men… 41 of 80 Q. What was your final decision? 11 19 4 10 1 9 1 3 10 of 80 2 Income? Annuit y 6 1 3 1 2 Drawdow n 3 Undecided 1 7 of 80 3 22 of 80 INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 16
WHAT DID THEY DO? Cash The best laid plans of mice and men… Q. What was your final decision? 15 of 80 ZID 15 Undecided 12 of 80 12 4 6 of 80 6 Drawdow n 6 Blend Annuit y 37 6 of 80 4 of 80 INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 17
WHAT DID THEY DO? Many were simply too overwhelmed to make a decision Place Holder for Video Montage INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 15
WHAT DID THEY DO? 37 of our 80 respondents failed to make a final decision by the end of our eight month study I’m overwhelmed by it all/ Life just got in the way The process is taking much longer than expected I no longer have an urgent need for the money My provider or adviser made me realise I don’t actually need to access my pot now I’m worried about turmoil in the stock markets, so I’ll hold off for now I didn’t want the tax hit and realised it was better to access other savings I found out I can’t access my pot yet or I would have to pay a penalty INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 16
WHAT DID THEY DO? Most decision makers have taken a lump sum Place Holder for Video Montage INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 17
WHAT DID THEY DO? Most decision makers have taken a lump sum Lump sums taken by respondents in our study Stated Intentions for Lump Sum Withdrawals Note: Based on stated intentions of the 38 respondents who took a lump sum withdrawal during our study window, including those that withdrew their entire pot. Respondents often intended to use their lump sums for a number of different purposes and have been multi-coded accordingly. INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 18
WHAT DID THEY DO? Few knew what the remaining 75% is invested in, the charges, or why they should think about shopping around Very low awareness of what pension is invested in – other than stocks and shares. Unless they have consolidated into a SIPP, awareness of charges is extremely limited. If their existing provider offers flexible drawdown, few shopped around. Generally, no idea where to go to shop around, or how to compare one drawdown proposition against another, other than brand recognition. Few expect this money to last for life, instead planning for a 5 to 10 year time horizon. Perceptions of risk and reward are not always aligned to the views the industry would take. INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 19
WHAT DID THEY DO? We have identified seven ‘pension personalities’ INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 20
WHAT DID THEY DO? Procrastinating Pete INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 21
WHAT DID THEY DO? Spend it Simon and Winding Down Wendy INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 22
IMPLICATIONS People tend to follow the path of least resistance, and need help to achieve good outcomes Rules of thumb Smart ‘drawdown’ defaults Industry-wide lexicon Help to understand what are the ‘best’ drawdown products Low cost advice solutions – will robo-advice do the job? INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM 23
ACTIONABLE, INSIGHTFUL, ACTIONABLE RESEARCH WWW. IGNITIONHOUSE. COM
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