What our customers think of pension freedom

30 September 2015
Following the introduction of the new pension freedom, Royal London commissioned independent research to determine whether our customers understood the implications of withdrawing money from their pension plan.

The research carried out by Harris Interactive Limited between 18th May and 24th of July 2015, based on 800 Royal London customers who had requested access to their pension plans. In this article we look at some of the results.

Good news

69% of customers took all of their Royal London pension as a lump sum.

This figure is relatively high, however it must be remembered that this option was not available prior to April and it is likely that there was some pent up demand. Our expectation is that the percentage of those taking full withdrawal will fall.

Just so we know we are asking the right questions, can you tell me what percentage have you taken / decided to take as a lump sum?
Base: All respondents (800)

The average lump sum withdrawn was £15,500.

The average sum taken is relatively low and represents a fund value that probably wouldn't be able to generate a significant amount of lifetime income. The research also showed that 68% of customers who answered said their Royal London pension would contribute less than 25% of their overall retirement income. Presumably therefore customers would still have these other sources of income available at retirement.

85% of Royal London customers rated the call 8 or more out of 10.

Feedback indicated that the majority of customers believed that their options had been clearly explained, that all their questions had been answered and that they received enough information to make an informed decision.

There is a slight caveat though - the majority of customers asked (70%) had already decided what they wanted to do with the money. Given the fact that the call ended with the customer being able to make progress towards this the satisfaction scores would naturally be higher, however 85% can still be considered to be high.

Less good news

23% of respondents intended to reinvest their pension money into a bank or building society account.

Q2 - What do you plan to do with your lump sum?
Base: All taking lump sum (740)

The most common plan for the money withdrawn was to reinvest it in a deposit account. This is despite the fact that the customers are informed that there will be a tax charge during the '2nd line of defence' process.

For customers who are looking to use the money to improve their financial position, for example by paying off debts, the tax charge may be a price worth paying, however if the money is going to remain invested this could be achieved within the pension plan. Fixed interest and deposit funds are available for those who prefer this risk profile.

56% of customers had taken either guidance or advice either before or after their call with Royal London.

Although 90% were aware before the call that they could discuss their options with either Pension Wise or a qualified adviser, many chose not to do so.

The main reasons given for this were that the pot was too small to warrant it or they already knew what they wanted to do with the money.


If we take these findings as a whole it suggests that the people most likely to withdraw a lump sum are those with smaller pots and there are very few customers looking to withdraw their money and re-invest it in, say, buy-to-let property.

As I have said before it's not that there is anything wrong with buy-to-let as an investment, it is simply that it is unlikely that returns would be sufficient to offset the tax charge that would result from withdrawing a sufficient lump sum from a pension to finance property purchase.

Although customer satisfaction is high we have a challenge as a profession to communicate the value of advice and how it could benefit the customer when they have a key financial decision to make.

Online fieldwork was carried out in the UK from 18th May - 24th July 2015 by Harris Interactive limited. 800 interviews were carried out with Royal London customers who had contacted the company with a view to withdrawing money from their pension plan.

About the author

Fiona Tait

Pension Specialist

Fiona joined the life and pensions industry in 1989. She is a Fellow of the Personal Finance Society, an Associate of the Chartered Insurance Institute and is currently Vice-President of The Insurance Society of Edinburgh. Fiona specialises in the areas of at retirement planning and pensions and divorce.

Last updated: 30 Sep 2015

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.