Option one of Investment Pathways is 'runaway' most popular choice

Option one of Investment Pathways, for savers who have no plans to touch their money in the next five years, has been the "runaway" most popular choice, Interactive Investor (II) has revealed, although overall take-up of pathways remains low amongst its customers.

The provider revealed that 95 per cent of its customers who have invested via a pathway have chosen this option, which is a low-cost fund with a mix of equities and bonds that provides potential for growth and maintains the same level of equity allocation.

Pathway three, for savers who plan to start taking money as a long-term income within the next five years, is the only other option to have attracted customers since the pathways were introduced, with 5 per cent choosing this option.

However, more broadly, II emphasised that only a "small proportion" of customers entering drawdown are choosing pathways, with just 6 per cent of those who have been through the pathways journey via II now holding pathways investments.

Interactive Investor head of pensions and savings, Becky O’Connor, commented: “It is still early days for the FCA’s Investment Pathways initiative; however our early data shows that fewer than one in ten people going through the journey have made investments via pathways.

“Of those that have, the overwhelming majority have chosen pathway one. This suggests, as you might expect, that most people approaching drawdown do not plan on retiring within five years of reaching the age at which they access their pension for the first time.

“It could also suggest this group of soon-to-be retirees have a higher risk tolerance than might be assumed.

“But with the majority so far choosing just one option and with a very small proportion so far choosing a pathway, this also suggests that the current choices set by the regulator might not be aligned with the circumstances of most people.”

She added: “Pathways can encourage people away from the real risk of inflation eating away at their pensions if they choose to keep their retirement pot in cash.

“In general, the initiative serves a useful purpose, although we continue to anticipate that the majority of our customers will choose to pick their own investments for their pension.”

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