Although Savers Ignored The Pensions Party, There’s Work To Be Done To Avoid Poor Decisions
Monday was Pension Freedoms Day, but not as many savers cashed out their pensions as expected. That’s great, but it doesn’t mean the job of encouraging smart decision making is done.
It was all a little bit anti-climactic as the sun shone in through the windows of pension providers this Bank Holiday Monday. It would have shone on more staff than usual given that pension providers had drafted in extra staff to man the rush of calls that were expected as the changes to the UK’s pensions system came into force.
Although Steve Webb had admitted he wouldn’t be annoyed if over 55s cashed out their pension pots in order to buy Lamborghinis or book luxury cruises, the Pensions Minister did warn that savers should think twice before calling up to access their pension straight away. He said: ‘April 6th is the start of something, it’s not a deadline. It’s not “shop now while stocks last”. The freedoms will still be there on April 7th and indeed on May 7th, and if someone is over 55 with a pot of money, why oh why oh why would they phone their pensions provider at midnight on April 6th?’
Webb needn’t have worried if he’d known how little demand there was going to be for instant access to pensions. The main pension providers each reported receiving just a few hundred calls on Monday enquiring about accessing their pension pot.
However, while it may appear that savers are taking their time to think before acting with regards to their pensions, there is still plenty of work to be done by the government and by employers to ensure that savers don’t make any decisions they’ll come to regret.
The government launched its guidance service, Pension Wise, on Monday which will work to give savers guidance on the new rules even if Pension Wise cannot give financial advice itself.
Employers too have a role to play, with 31% of staff thinking their employer should be the one responsible for ensuring their staff are well financially educated. Workplace Financial Education sessions, for example, are becoming more popular as HR departments realise the need to educate their employees and also the gratitude they could receive from providing financial education.
There is plenty of educating to be done, therefore, before these pension changes can be labelled a success. While cashing out pensions may be a good idea for some, it is vital that savers understand all of the benefits and consequences of each option before selecting one.
Photo credit goes to gemsling