Nearly two thirds of savers (63%) say they will likely leave decisions about their retirement until a year before their retirement date, according to research – making strong default investment strategies essential.
Research by Alliance Bernstein found that 63% of defined contribution (DC) savers said they would not make a decision on their pension savings until one year before they retire, or closer.
A further 17% said they would make a decision five years before they stop working.
Alliance Bernstein’s poll of 2,566 investors also found a low appetite among the public for making firm decisions on retirement savings.
David Hutchins, a portfolio manager responsible for multi asset solutions at Alliance Bernstein, said this research emphasised the importance of DC schemes having a well-managed default strategy through to retirement.
He said: “Most don’t want to make a decision on their savings until the last possible moment. Members need help in managing their DC pension schemes to ensure their financial needs are met throughout their retirement. They can’t do it alone.”
The research, which was conducted by YouGov last year, also highlighted that more than two in five (43%) of DC savers said they would prefer a guaranteed retirement income that allowed them to take a percentage of their retirement pot as a lump sum and the remaining amount as a monthly income.
This is despite recent data from the Financial Conduct Authority, which showed that the number of individual annuities purchased in the 12 months to the end of March 2023 fell slightly when compared to the previous 12-month period.
The government consulted last year on decumulation options but has yet to publish its response.
It wants to bring in a duty on DC trustee boards for schemes to provide default decumulation options to provide “a level of support for those who find the decisions they need to make at the point of access daunting and help trustees provide members with default options for those who are less engaged”.
Further reading
Understanding DC members’ needs ‘essential’ (28 February 2024)
TPR: Do better on decumulation (15 November 2023)
Why DC default investments matter for members (12 March 2018)
