As part of this report, the BIT conducted a study of 1,468 UK consumers aged 54-70. It found that 33.7 per cent of the sample had DC pots worth under £30,000 in total.
We can only speculate how many of these people with relatively small pots are ‘unengaged’, precisely because they are looking elsewhere for most of their retirement income.
As the chart shows, the study found a fifth (20.8 per cent) wanted flexible access to their savings, 6.9 per cent wanted to take some as soon as possible and leave the rest invested, and 5 per cent wanted to leave all their pension invested with a view of handing it over family.
The investment pathways are a crude attempt to replicate what an IFA would look at together with a client taking their tax-free cash out and moving the other 75 per cent into drawdown.
While the client is naturally focussed on getting their hands on the cash to meet a pressing short-term need, the adviser can lift their eyes to the longer horizon and make sensible plans for the portion left invested.
The implementation of investment pathways is in some ways therefore an interesting test case into what can be achieved in ‘robo-guidance’ through FCA-rubber stamped customer journeys.
However, it also highlights that you can only go so far in robo-land before you need to turn to the services of a adviser to make a fully researched and personalised recommendation that recognises all the personal circumstances of each would-be retiree.
An adviser will be able to ask the questions that might uncover the reality of what that DC pot needs to achieve. Is it the only long-term personal savings pot available to the customer? Or are they looking to downsize their home, tap into their small buy-to-let portfolio, or are they waiting for an anticipated inheritance, or plan to sell a business before contemplating retirement? What attitude to risk can they adopt?
It is that thorough fact find that uncovers the best options for their DC pot(s).
Only an IFA can uncover the real financial needs of a person, based on a thorough understanding of their circumstances.
That same IFA is likely to be best placed to help DC pension pot holders make the right choices in decumulation and the right investment selections in line with those decumulation choices.
Adrian Boulding is director of retirement strategy at Dunstan Thomas
