Defined contribution members demand savings flexibility

A poll of savers with annuity provider Phoenix shows 26% would invest their “entire pot” if they could take it all as a cash lump sum.

And a further 29% said they would “save it” as cash, with just 21% saying they would spend it immediately, 13% of whom said this expenditure would be for “debts” or “necessities”.

The remaining 11% said they would prefer to annuitise.

Phoenix head of annuities Alan Bradbury said: “Policyholders clearly want greater flexibility with their retirement pot than is currently available.”

And he added the data also gives weight to the idea many people like more flexibility in their savings than traditional pensions allow, as evidenced by the growing popularity of vehicles like ISAs.

During last week’s Budget, the government changed trivial commutation rules, allowing pensioners to take pots of up to £2,000 as cash, and to be allowed to do this for a maximum of two different pots.

Respondents to Phoenix’s survey eligible for trivial commutation were divided on whether to take it, with 21% each saying they would or would not.

The rest were either undecided or unaware of commutation rules.

Legal & General is anticipating a rush in demand from customers looking to hive off £2,000 chunks of their savings into separate pots for commutation.

“We welcome these [commutation] changes,” said the insurer’s pensions policy chief Adrian Boulding.

“People will have to go to their providers and ask if they will split their pots up, but for someone with the average £30,000 savings this will be a useful way of freeing up more of it as cash.”