Less than half of prospective drawdown customers say they'll use Investment Pathways

Over 60 per cent of prospective retirees support the introduction of Investment Pathways, which come into force from 1 February, although just 44 per cent said they will actually use them, industry research has revealed, prompting concerns over the impact of inertia.

The survey, from Legal & General Investment Management (LGIM) and NMG Consulting found that the strongest interest for the pathways was seen amongst pre-drawdown savers with pot values between £30,000 and £100,000, which represents the majority of the non-advised drawdown market, according to the firms.

In particular, it found that nine in 10 consumers liked the ability to align at least one of the options to their needs, with 60 per cent feeling confident enough to make an independent decision following the guidance they received.

However, it warned that the existence of the pathways alone won't solve the “problematic lack of retirement planning”, with 33 per cent of respondents saying they would not move from their default accumulation funds unless prompted.

Furthermore, more than half of existing drawdown users thought that Investment Pathways were too basic due to a lack of fund choice, whilst 12 per cent stated that they would need more formal financial advice.

There was further disparity in the shift users wanted to see, with a fifth of respondents stating that they would prefer a wider fund choice, and a third preferring to choose from a small shortlist of funds.

Both prospective and retired drawdown customers highlighted income drawdown as the most popular pathway however, with 46 per cent and 43 per cent citing this option respectively.

The “vast majority” also agreed that withdrawing all of their money would be a “reckless, inappropriate option”, and would need to be accompanied by detailed risk information.

Choosing a single pathway was the most popular strategy for prospective drawdown users meanwhile, and was highlighted by 38 per cent of respondents, whilst over a third (36 per cent) said they would split their pot between pathways.

Commenting on the findings, LGIM head of defined contribution, Emma Douglas, stated: “The positive reception to Investment Pathways is a promising first step in overcoming inertia at retirement and achieving greater engagement with non-advised members.

"The investment pathways go a long way in alleviating anxieties, in particular for non-advised savers who are yet to draw down.

“Digital tools can help bring the pathways concept to life, extending beyond the four simple options to bringing about a greater understanding of the risk and reward of each solution.

"Our research found that members welcome more regular guidance when making decisions on their retirement, with 81 per cent feeling the current 5 year review is too infrequent.

"It is therefore important we keep in close contact with members during this stage of their retirement journey as they make decisions of how to spend their money.

“Done well, investment pathways should complement other industry initiatives such as the pensions dashboard and also pension consolidation, to give members a single view of their retirement investments and clear information about their options.

"In this way, we can turn the confidence boost that investment pathways deliver into meaningful action which delivers better retirement outcomes for savers.”

NMG Consulting partner, Jane Craig, added: “It’s great to see a much needed default solution for retirement income come to market.

“But it’s clear that the less engaged proportion of pension savers are going to need a really strong nudge to take notice and act – the greatest barrier to take-up is likely to be inertia.”

    Share Story:

Recent Stories



How the bulk annuity market is changing
Laura Blows speaks to Peter Jennings and Prash Mehta from Just about trends in the bulk annuity market and how this could impact trustees hoping to secure insurer engagement in 2022 and beyond
DC master trusts
Pensions Age editor Laura Blows, editor of Pensions Age look at developments within the DC master trust market with Paul Leandro, partner at Barnett Waddingham, and Mark Futcher, partner and head of DC at Barnett Waddingham.

Advertisement Advertisement