11th June 2015

Scottish Widows: Pension Freedoms Month 2

Interest in Pension Freedoms remains unabated in the press with many stories appearing about who is doing what however there is little concrete evidence as to what is actually happening.

Scottish Widows modelling predicted that there would be a massive surge in activity in April and May of 2015 and it would be dominated by people looking to access their cash – this has proven to be the case with 70% of requests from customers in the first couple of weeks for full encashment or partial encashment.  The numbers of people taking action and cashing out are sometimes painted as huge – but in reality they are pretty small – less than 2% of eligible customers have taken any action at all.  It’s not a great press story but 98% of customers do nothing about pension freedoms – this is pretty much the story from advisers as well – where customers have an adviser and a plan for retirement they are pretty much sticking by those plans and not being woken up to take actions.

As a provider Scottish Widows have seen a marked decline in requests for cashing in funds – probably a bit quicker than was expected.  The numbers of people looking to cash in their funds has declined by over 70% in 5 weeks – and it’s even more marked if we look at the digital channel in isolation where there has been an 87% reduction in those cashing in their funds.  So the surge activity rather than being the full 2 months has been compressed into an even shorter time span.

Another key characteristic has been the small values of those taking action –

• 31% of those taking action have a fund of less than £5,000
• 71% of those taking action have a fund of less than £20,000

What Scottish Widows are now seeing is customer’s taking more time over considering their options – it should lead to an uptake in advice opportunities for advisers as customers look at the more complex options like Flexi Access Drawdown.  Half of Scottish Widows customers taking action now (end of May) are doing something other than taking all of their fund in cash.

A sign of this consideration of options is the increase in customers who are visiting Pension Wise – in the first week only 3% of customers had been to Pension Wise – whereas by week 5 it had risen to a third of customers contacting us who claimed to have been to Pension Wise.  The Pension Wise telephone service claims to be operating about 80% capacity with average call time between 30 and 35 minutes.

Scottish Widows still see considerable digital traffic to www.scottishwidows.co.uk/retirement-planning and lots of people are going on doing calculations.  It’s interesting to track how people are using the site but also what devices they are using – the market exploring their options at retirement still overwhelmingly favour a desktop computer over the tablets and mobiles – this might well represent the seriousness of the decisions they are making or considering.  

Scottish Widows expect the market to settle into a new norm over the next few months – and market innovation will begin to come to the fore to replace the current model of all hands to the pump dealing with surge volumes.

Pension Reforms, Pensions, Retirement