Few pension savers aged between 50 and 72 have considered the income or wealth they might need to support their retirement, according to research published by the Department for Work and Pensions (DWP).

The qualitative research, titled Pension Freedoms: a qualitative research study of individuals’ decumulation journeys, found that participants tended to hold optimistic views of the likely adequacy of their retirement income and of their ability and opportunity to work up to their chosen retirement age.

When asked about their retirement plans, respondents were also more likely to focus on the independent phase of their retirement until prompted to consider the longer-term picture.

Those that did talk about potential health or social care needs were influenced by their own current health or the experience of family.

The study found that there was little evidence of people giving detailed consideration of the length of their retirement or their needs beyond general aspirations such as having the financial security to be able to pay for essentials, financial freedom to enable a lifestyle that was consistent with or better than their current one, and the ability to support their adult children.

Indeed, these issues were often the cause of commencing pension decumulation, with topping up income in response to financial shock, increasing income to fund lifestyle choices, supporting adult children, paying off debts or mortgages and investing in retirement products being the main reasons behind decisions to decumulate pensions.

The report found that across different demographics “people consistently viewed their defined contribution (DC) pension more as a component of their overall savings from which they may draw, rather than specifically reserved for the purchase of an income product in retirement”.

The study also revealed that participants were more willing to liquidate smaller pots entirely, particularly if these were inactive, compared to either not touching or drawing a more complex mix of retirement income products and cash from larger ones.

The report continued: “If more consumers consolidated their DC pensions it could encourage detailed consideration of exactly how much a consumer needs to withdraw, rather than encouraging a tendency to close a whole pot, because it does not feel worth leaving a small amount in the pension.

“Bringing pensions together could also make it easier to see the potential of their overall pension savings to generate retirement income.”

Various groups were also found to have avoided seeking financial advice for a number of reasons.

Some knew what they wanted to do and simply wanted information on how to operationalise their plans, while others did not seek advice because they were wary of the complexity of pensions decisions and proceeded to decumulate despite lacking confidence in their understanding of the consequences.

Some participants on lower household incomes perceived the cost of personal financial advice to be a barrier to seeking professional advice, some were put off by the perceived burden of engaging with support on top of busy lives or health conditions and participants with all levels of perceived financial capability could have a mistrust of financial advisors and the pension industry.

The report noted: “When asked what support would be helpful, participants expressed a desire to have more information and guidance across all their pension pots in one place. Some had achieved this by paying for advice, others felt they could not get the full picture.”

The DWP commissioned NatCen Social Research to conduct the qualitative study in order to better understand people’s experiences of, and influences on, pension decumulation.

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