Scottish Widows is to move its pension customers en masse to a new default fund that assumes they will go into drawdown or remain invested into retirement.
The provider says just a quarter of its customers have purchased annuities since the pension freedoms came into force, rendering its default lifestyle strategy out of step with most savers.
As a result, customers with more than five years to go before retirement will be moved into funds that are targeted at entering drawdown arrangements.
Advisers, employers and members are being written to ahead of the changes taking effect in three months’ time.
Customers will be able to opt out and instead pick a fund that aims at providing cash or an annuity.
In February 2015 Money Marketing revealed the provider had launched a non-advised drawdown product for savers with pots worth £10,000 or more.
Scottish Widows pensions director Ronnie Taylor says: “For customers to make the most of the new freedoms, they really need to think about the way they want to use their pension fund in later life at least five years before their retirement date and ensure they pick an investment glide path to accommodate it.
“But despite our best efforts to draw attention to the issue, many customers remain disengaged and, where this is the case, we believe it’s important and in their best interests to take action on their behalf.”
Taylor adds: “Unlike many other providers, our products have been designed in a way that allows us to make changes as part of annual governance reviews, which has enabled a bulk switch to a more appropriate default fund.”