As PensionBee’s Customer Insights Manager it’s my job to get to know our customers better and use their feedback to ensure we’re always building the best pension product for their needs. Recently I’ve been learning a lot about consumers who are aged 55 years and older, and can access the money in their personal pension pots. I’ve been fortunate to work on a research project alongside Dominic Lindley, who is well known for his work on amplifying consumer voices in the pensions industry, and driving positive outcomes.
After saving for most of their lives, consumers can finally legally access money in their pension pots once they reach 55. However, the way that the pensions industry currently operates does not enable them to easily plan, withdraw and enjoy their money as it should.
One insight that surprised and worried me the most, was to learn that many consumers withdraw more of their pension than they need in order to feel a sense of ownership over their money.
Many consumers withdraw more of their pension than they need in order to feel a sense of ownership over their money
Often they move it to a different savings or current account, as they prefer the experience of accessibility that this provides, compared to their pension. They may even knowingly sacrifice long-term financial wellbeing and future investment growth for easy access.
One customer, Juliet, in her forties, informed me that her parents withdrew their entire pension pots (worth hundreds of thousands of pounds) and transferred the money to their current account, in order to feel more secure and in control of their money.
Another customer named Peter, and in his sixties, commented, ‘I want to get the money out because it is currently locked away. That’s the problem with pensions, you may get a better return on your money, but it’s more locked up than normal money in the bank.‘
Interestingly, Peter sees money in his bank account as ‘normal’ compared to money in his pension, and this appears to be a representative view. Almost a third of the consumers we surveyed, who had accessed money from their pensions, informed us that they did so to take control of their pensions by withdrawing their money and putting it into a different account.
65% of respondents reported feeling very confident about using their current accounts, while 53% were confident about using their savings accounts. On the other hand, only about 20% felt confident using their pensions, which was one of the financial products where consumers reported the least confidence in our survey. Only about a third of respondents said that they didn’t find making decisions about pensions and retirement income daunting and complex.
I can understand why Peter, and other consumers, feel that a pension is not like ‘normal’ money in a current account. Whilst they interact with money in a current account on a daily basis, and have instant visibility about how much they have thanks to mobile banking, pensions often feel distant and difficult to engage with, due to the alienating effects of jargon, excessive paperwork and lengthy administrative processes. Many pension providers send an annual statement by post, often to an old address, where a customer has to wade through complex information to see what their current pension balance is. This makes it difficult for consumers to feel connected with their savings.
Can innovation drive a sense of pension ownership amongst consumers, and lead to better long-term decision making? At PensionBee, we think so! We want customers to experience the ease of managing their pensions, as they would their online bank account. I am proud that the benefits of digital innovation in pensions are being felt across all age groups, and that a majority of PensionBee customers are engaging with their pensions through their smartphone app.
The Pension Freedoms, which were implemented in 2015, were welcomed by consumers, as they had been calling for better access to their money and more choice after the age of 55. Unfortunately, these consumers have since been underserved by the market, and innovation tends to be focused on savers with higher than average pots, who are willing to pay extra for advice, which can often be costly.
At PensionBee, we’re keen to change this. In minutes, customers can initiate a free withdrawal from their online Pensionbee account. They can use our online tax calculator to ensure that they’re in control of how much tax they pay. They also have instant access to their real-time pension balance, which can help them plan. Once customers initiate their withdrawals, they usually receive their money into their current accounts within a week. One customer Frank, who is in his sixties, commented, ‘That’s where you guys score highly, the simplicity of it... The capability to just go ahead and put the funds across and get to drawdown, and the simplicity of the funding charges... Getting the drawdown was smooth, took about a week. Future drawdowns should be quick and so that’s good.‘ This feedback brought me joy!
Nevertheless, we feel that the experience of drawdown can be even easier, and can give consumers even more of a sense of ownership of their savings. Please watch this space, as we have an exciting announcement coming very soon!
As always, we’d love to hear your feedback and ideas, so leave your comments below or get in touch with the team on Twitter!