2018年-FCA英国金融行为监管局_ms16_1_3_annex_5_134页_2mb

Retirement Outcomes Review: Final Report - Annex 5 Summary

Core Content

This report presents findings from a study on the engagement of non-advised drawdown pension customers with their investment choices and drawdown products. Conducted by NatCen Social Research with support from the Pension Policy Institute (PPI), the study aimed to understand how engaged customers were in their investment decisions and their retirement income needs, particularly in the context of pension freedoms introduced in April 2015.

Main Points

• Pension Freedoms Impact: Since 2015, over a million defined contribution (DC) pension pots have been accessed. Two-thirds of customers moved to flexi-access drawdown, while a third opted for annuities.
• PCLS Withdrawal: The majority of drawdown customers took their Pension Commencement Lump Sum (PCLS) at the same time as moving to drawdown.
• Engagement with Investment: Customers showed mixed levels of engagement with their investment decisions. Only 37% knew exactly where their money was invested, 34% had a broad idea, and 28% were unsure.
• Factors Affecting Engagement:
  • Low pension knowledge was the most significant factor associated with not knowing where money was invested.
  • Customers with larger pension pots and SIPP (Self-Invested Personal Pension) customers were more likely to be aware of their investments.
• Monitoring Investments: 40% of customers had not checked their investment performance since moving to drawdown. Those with smaller pots, life insurance providers, or no other pension pots were less likely to monitor performance.
• Changing Investments: Only 14% of customers had made changes to their investments. A small proportion had considered changes, but most did not.
• Changing Providers: While 89% of customers were aware they could change providers, only 19% actually did so. Many customers were content with their current provider and found it easier to stay with them.
• Fees Awareness: 46% of non-SIPP customers knew exactly what fees were associated with their drawdown product, while 22% were unaware. Lack of awareness was more common among those with smaller pots, lower pension knowledge, and no engagement with Pension Wise.
• SIPP Customers: SIPP customers were more engaged with their investments and more likely to check performance and change providers. 77% of SIPP customers knew exactly where their money was invested, compared to 29% of life insurance customers.
• Future Withdrawals: 71% of customers who had not yet withdrawn from their drawdown product planned to do so in the future.

Key Findings

• Low Engagement: A significant portion of customers were not actively involved in their investment decisions, often due to low pension knowledge, small pot size, or lack of interest.
• Confidence in Decisions: Among those who made investment decisions, 40% were very confident, and 57% were fairly confident. Confidence was higher for those with larger pots and those invested in individual funds.
• Risk and Return Prioritization: Risk of losing money was the most important factor for investment decisions, with 52% considering it very important. Return on investment was also important (34%), but risk was prioritized over return by 59% of respondents.
• Inertia to Change: Many customers remained with their current provider, even though they had the option to change. This was attributed to satisfaction, ease, and a 'better the devil you know' mindset.
• Pension Wise Utilization: Customers with lower or medium income, life insurance customers, and those in the Medium Engagement (ready-made funds) group were more likely to consult Pension Wise.

Engagement Groups

Four distinct groups of customers were identified based on their engagement levels:

1. Least Engaged:

   • Mostly aware of having a drawdown product.
   • Limited knowledge of investments and fees.
   • Tended to be younger, with smaller pots, lower income, and less pension knowledge.
   • Around 34% of customers belonged to this group.

2. Medium Engagement (Ready-Made Funds):

   • High probability of investing in ready-made funds.
   • More likely to be with life insurance providers.
   • Around 34% of customers belonged to this group.

3. Medium Engagement (Cash):

   • Actively chose to keep money in cash despite potential lower returns.
   • Most aware of where their pension money was invested.
   • Around 5% of customers belonged to this group.

4. Most Engaged:

   • Aware of their investments and fees.
   • More likely to check performance and change providers.
   • Tended to have larger pots, higher income, and other pension types.
   • Around 26% of customers belonged to this group.

Limitations

• The study focused on customers who entered drawdown in the first two years after pension freedoms were introduced.
• Many drawdown pots were not the main source of retirement income, as they were relatively small and customers had other income sources like defined benefit pensions.
• The sample was drawn from eight providers, representing around 65% of the market, so results may not be fully representative of the entire market.

Conclusion

The study highlights the varied engagement levels among non-advised drawdown customers, with many not fully understanding their investment choices. It also underscores the importance of pension knowledge, pot size, and provider choice in shaping these decisions. SIPP customers were found to be more engaged, suggesting that the structure of these products may encourage more active involvement in investment management. The findings feed into the FCA's Retirement Outcomes Review, emphasizing the need for better guidance and awareness among customers.