Research from the NAPF finds the government must do more to guide ‘Malcolms’ with DC savings in light of the new pension freedoms, writes Jackie Wells

Are you a ’Satisfied Sarah’, ‘Pinched Penny’ or a ‘Malcolm in the middle’? This is the question posed by the findings of the National Association of Pension Funds’ first piece of its new research series designed to understand what retirement means for 50-70 year olds against the backdrop of the government’s flagship pension freedom reforms.

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Three clear groups emerged: The ‘Satisfied Sarahs’, who have built up a significant defined benefit (DB) pension on top of their state pension, the ‘Pinched Pennys’, who have little or no private pension beyond their state pension, and the Malcolms in the middle, who have defined contribution (DC) savings on top of their state pension and little or no DB provision.

For ‘Satisfied Sarahs’ and ‘Pinched Pennys’  the pending reforms, which focus primarily on DC pension savers, have little relevance. The ‘Malcolms in the middle’, however, are by far the group most affected by the pending changes.

If you are a Malcolm then you’re not alone. There are 4.8 million working Malcolms in the UK, which means there are 4.8 million people eligible to access their DC pension savings within the next five years.

There are 4.8 million people eligible to access their DC pension savings within the next five years”

With only eight weeks to go until the pension freedoms kick in our research shows there remains a great deal of uncertainty among people about what they should do to make best use of the new liberties.

For Malcolms yet to enter retirement, this is not good news as the decisions they will now have to make under the new reforms carry the greatest risk/benefit − if the decision is poor it will have the greatest impact.

They need visible and easy to access guidance on the options available”

One clear finding from the research is that 82% of the retired and 78% of the working Malcolms said they would rather have a secure income for retirement than a pot to dip into However, lifetime annuities remain the most obvious mechanism for achieving this in today’s market, a choice which may not suit all.

To give Malcolms the best possible chance of making the right decisions savers need three things. They need visible and easy to access guidance on the options available, clear pathways that are easy to understand, and access to high quality income solutions designed to meet their needs.

Trustees have an important role to play in the pensions reforms as they will be required to signpost members to the Government’s Pension Wise guidance service. The success of this guidance service will be critical, especially in the early days when savers are still so uncertain about how they will be able to access their pension pots at retirement.

The success of this guidance service will be critical”

What is clear from the research is that pension savers, more than anything, want a secure income in retirement. It is critical that government, employers and pension schemes work together to deliver solutions that meet those needs and avoid a spike in pensioner poverty that could otherwise arise.

Jackie Wells is head of policy and research at the National Association of Pension Funds