Industry urged to encourage greater support for members in lead up to first pension withdrawal

Almost three-quarters (71 per cent) of Fidelity pension scheme members access their tax-free cash before their selected or default retirement age, a new report by Fidelity International has revealed.

Its Stepping into Retirement report highlighted how member engagement and confidence is affected during and after crystallisation, with 74 per cent of Fidelity members who have accessed some of their pensions having a high or medium level of engagement, compared with 30 per cent across the board.

Deciding to make the first withdrawal from a pension pot was found to be a key driver for individuals to engage with their pensions, but Fidelity stated “more needs to be done” to build savers’ confidence at an earlier stage.

Fidelity’s survey also found that 34 per cent of members aged under 55 achieved a ‘high’ score for general financial confidence, rising to 51 per cent of over-55s who had not withdrawn any money from their pension, and to 70 per cent for those who had withdrawn pension savings.

Despite overall financial confidence growing through the act of accessing their pensions, a separate research study from Fidelity found that 45 per cent of respondents aged 55-75 felt that retirement planning was too difficult to do themselves.

Fidelity International head of pension products and policy, James Carter, commented: “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.

“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.”

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