Asks Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas
A nationwide retirement income planning study of the Baby Boomer generation which pensions technology company Dunstan Thomas commissioned recently, found that less than a third (32%), of 66-71-year old personal pension policyholders, recalled receiving their pension Wake-Up Pack. The Pack is currently prompting only one in 10 (11%) Boomers into actively planning for retirement.
This same study found that 92% of Baby Boomers aged 54-71 years had originally set their predicted retirement age at or before age 65. In other words, 92% of the oldest group of ‘Boomers’ aged 66-71-year olds captured by the study should have received their Wake-Up Pack at time of asking - but only 32% recalled seeing it. We also found only a very small number had alerted their provider to changes in their retirement plans although nearly all of them reported pushing back retirement plans in the same study. So far so disconnected.
The regulator’s rule on the Wake-Up Pack is that it should be sent out four to six months before planned retirement date, or when a customer requests a retirement quotation. However, our findings suggest that prescriptive rules like this no longer serve the customer well. Of the minority who recall receiving a Wake-Up Pack, we found 11% were simply arriving too late to help them. Put simply, they’d already made retirement decumulation decisions by the time the pack arrived, so it was a just waste of paper.
In the past, Wake-up Packs have been discredited by the regulator for steering policyholders into purchasing their existing provider’s annuity. A Thematic Review revealed some providers were enclosing their own annuity application form in with their Wake-Up Packs. The FCA insisted on this practice stopping and the Open Market Option on annuity purchase stimulated. However, that was all before April 2015. That lack of an ability to send just the provider’s own annuity quote may be one of the reasons why so few people now purchase an annuity. In short, the drive to get people access to better rates may well have backfired - resulting in fewer annuities being purchased.
Our findings suggest that now is the time for the regulator and industry alike to stimulate the building of digital and interactive Wake-Up Pack as the perfect (digital) accompaniment to the Pension Dashboard which is, hopefully, set for delivery in two years’ time.
The digital Wake-Up Pack could take the form of a secure, yet interactive portal offering customers an opportunity to adjust their stated retirement age. It could also enable providers to convey information about de-risking assets well ahead of their actual/accurate retirement age.
Right now, I believe most customers don’t understand the importance of setting retirement age and linking this to investment choices and automatic de-risking processes. This must change to improve outcomes for more at-retirees. Guidance on retirement income optimisation and decumulation options could also be offered - hopefully stimulating many more to contact an IFA to gain more clarity.
Data Crunch -
*Survey of 1,002 54-71-year olds resident in the UK conducted by Opinium for Dunstan Thomas during June 2017
Of 66-71-year olds with personal pensions confirmed they have not receive their Wake-Up Packs
Of 66-71-year olds don’t remember receiving their Wake-Up Packs
Of 66-71-year olds confirmed receipt of their Wake-Up Packs
Of Wake-Up Packs are arriving too late to assist policyholders with retirement decumulation decision-making (i.e. they’ve already had to make decumulation decisions before their pack arrived)
Of Baby Boomers anticipated retiring at or before age 65 when they took out their first pension (and stated anticipated age at which they would retire)
Is the Mean Average at which all Baby Boomers (age 54-71 years old today) expected to retire when they took out their first pension
Is the average age at which not yet retired Baby Boomers, aged 54-71 years today, expect to cease all paid work
Of Baby Boomers already think their pension provider’s pre-retirement communications is poor
At what age did you receive a pension ‘Wake Up Pack’ from your provider?
Based on a large nationwide sample of 66-71-year olds with a personal pension
|N/A- I have not received a pensions Wake Up Pack from my provider yet||18%|
|Before age 60||18%|
|I don’t remember receiving this letter||51%|
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