Defined contribution (DC) providers must improve their communication as more than two thirds (69 per cent) of members have not been contacted about Covid-19, according to PensionBee.

A report from the pension provider said more needed to be done to support customers through the pandemic as it detailed research into the barriers and challenges that people saving into DC pensions are facing and outlined six recommendations for how DC pension schemes could improve.

One in ten (10 per cent) had been contacted by their provider with an explanation of how the pandemic might affect the way in which they would access their pension, while 7 per cent had been told by a provider to seek impartial advice or guidance before accessing retirement savings.

Just over a third (34 per cent) of respondents thought decisions about accessing their pension were harder due to the coronavirus pandemic.

The report recommended the development of simple investment and communication pathways for people, as well as aid in accessing advice and guidance, after it found that 55 per cent of those who had not accessed their pension said the pandemic had made them more likely to seek advice.

More than half of those surveyed (54 per cent) said they found decisions about pensions and retirement income daunting and complex, and 28 per cent put off retirement planning as they were afraid of making the wrong decision.

The report stated: “The pension freedoms have increased the complexity of retirement income decisions for individuals. Simply expanding the choices available is unlikely to result in people becoming more empowered.

“The system still relies on people at retirement accessing guidance and advice, becoming informed, engaged and taking active decisions.”

The report recommended that innovation aimed at making those relying on DC pensions or opting not to take advice feel more in control.

The report warned that a desire for control was creating a “dash for cash” as it highlighted that 44 per cent of respondents stated that taking money out of their pension would make them feel more in control.

PensionBee warned that people in non-advised drawdown were at risk of “paying extra tax, being in inappropriate investments, paying high charges or withdrawing so much they run out of money”, adding that “there has not been innovation aimed at these people to provide them with a good-value, simple-to-understand product”.

The report also suggested ensuring improved access to financial data after finding that 68 per cent of respondents were worried about the value of their pension.

More than a third (35 per cent) of those who had not accessed their pension said they did not know how to find out about the amount they could expect to receive in retirement.

It also suggested ensuring products had clear charging structures, as nearly 60 per cent of respondents said that they found it hard to compare charges between different pension schemes.

Offering guidance on sustainable withdrawal rates was also highlighted as a key step pension schemes could take, as around one-third of respondents said a sustainable withdrawal amount was greater than 8 per cent a year and a further one in seven said that they didn’t know.

PensionBee said this mirrored “the actual behaviour of people in the market”, pointing out that Financial Conduct Authority research had found that withdrawal rates of 8 per cent and over were the most common rate across all pot sizes except for the largest pots in 2018/19.

Share Story: