Comparing the experience of Royal London customers with the latest industry data available from the Association of British Insurer, (ABI) shows that:
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The average Royal London customer drawdown payment could provide an income lasting past the age of 95 which is 20 years longer than the industry average;
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The average amount invested in a drawdown arrangement with Royal London was 3% higher than the amount invested by the average industry customer.
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In respect of those customers making cash withdrawals:
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The average Royal London customer cash sum payment is nearly 25% lower than the industry average. This potentially reflects awareness of the tax implications of taking larger cash sums;
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Royal London customers’ average cash sum fell from £15,000 (in line with figures released by the ABI in the second quarter of 2015) to under £10,000 in the fourth quarter. The likely initial tax charge on £10,000 would be £1,989, much less than the £3,600 paid on £15,000.
Fiona Tait, pension specialist at Royal London, commenting on the latest statistics said: “We are encouraged to see that Royal London customers are being very astute in the way that they are choosing to take advantage of the pension freedoms. They appear to have taken notice of warnings about the tax implications of taking all their pension fund and that income payments need to last well into their old age.”
Royal London customers who had decided to take their pension pot as a cash lump sum are being smart, with the majority now using the cash to clear their mortgage or other debts. Previous research had shown that nearly a quarter of customers, (23%) who withdraw their money intended to leave it cash within a bank, building society or cash ISA account.
Fiona Tait continued: “The majority of Royal London’s business is from impartial financial advisers and our research shows that customers followed advice and felt more confident as a result. Pension customers are clearly benefiting from access to advice on what are often complicated decisions. The positive impact on customer behaviour of having access to financial advice means people are enjoying the freedoms the way there were intended.
“However, our customer experience shows that we need to find a solution soon which will enable access to regulated impartial financial advice to be more readily available to all UK consumers. We need more pension freedom customers to be better equipped to make these important decisions.”
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