Shopping around
With the increased flexibility brought in as a result of pension freedoms, the idea was that freedom to take one's pension as one wished should automatically come with more choice, but in reality there seems to be confusion and inertia when it comes to drawdown.
For example, many people still stick with the provider with whom they accumulated the pension, rather than shopping around.
In 2017, it was revealed that some 94 per cent of non-advised drawdown sales post-pension freedoms were made to existing customers, according to figures from the Association of British Insurers (ABI).
Mr Cameron adds: "The Financial Conduct Authority (FCA) is looking at how pension providers might do more to help those approaching retirement to shop around and get the best deal from across all providers, not just whom they have been saving with."
This is why the FCA issued its retirement outcomes review in 2017, in which it analysed the behaviour of people post-pensions freedoms.
Approximately 1m people accessed their pension pots post April 2015, and drawdown has so far proved exceptionally popular, the review highlighted.
The proportion of drawdown bought without advice rose from approximately 5 per cent before the freedoms came into play, to 30 per cent by 2017.
What now?
In the regulator's 2017 Retirement Outcomes document, the FCA said: "This market is still developing and firms and consumers are continuing to adjust to the reforms."
However, it also identified several potential challenges for the industry - regulators, guidance providers, product providers, advisers and policy makers - to attempt to overcome.
The five main areas outlined as concerns by the regulator were:
- Consumers who fully withdrew their pots did so partly because they do not trust pensions.
- Most consumers choose the path of least resistance by accepting the drawdown option offered by their pension provider without shopping around.
- Many consumers have been buying drawdown without advice but may need further protection to manage their drawdown effectively.
- Annuity providers are leaving the open annuity market, reducing choice for consumers.
- Product innovation has so far been limited.
While the industry works through the various challenges and complexities of the pension freedoms - as Mr Steedman puts it, "deemed a bit of an experiment by some" - the new flexibilities of drawdown have caught the public's attention.
He adds: "This is a huge achievement, given the pitiful traction of other pension initiatives, and the desperate need for private pension provision for the burgeoning future pension demographic."
For Ms Tait, as a result of the pension freedoms, the very role of drawdown has changed, meaning conversations between advisers and their clients have also changed.
She explains: "Discussions about whether a client should select drawdown or annuity have now evolved into a discussion about how and when clients can use drawdown and annuities as part of their long-term strategy.
"Advice and guidance must still focus on the dangers of running out of money too soon, but the drawdown plan may not itself be required to provide lifetime income, where other solutions are available."
simoney.kyriakou@ft.com
