Steven Cameron, Pensions Director at Aegon comments: “The Work and Pensions Select Committee’s Inquiry into pension freedoms came at a time when the FCA was concluding its deep and thorough review of the ‘at retirement’ market. We support the Government’s decision to defer any further interventions until the FCA reports back on its final decisions, due later this month. We support the FCA’s focus on additional protections for those using income drawdown who have not benefitted from seeking advice.
“As the Government says, pension freedoms are there to allow each individual to use their pension fund in a way that suits their retirement needs. The Select Committee’s recommendation for providers to offer default decumulation pathways went several steps too far, potentially defaulting individuals into a product type, level of income and investment fund choice which might have been wholly inappropriate for an individual’s circumstances. For those entering retirement, the focus should be on improving engagement. Three years into pension freedoms and with the market continuing to evolve, it’s far too early to focus on defaults which would effectively be admitting failure to better engage.
“We also support the Government deferring making any decisions on pension dashboards until the DWP completes its feasibility study. While the Select Committee favours a single dashboard, we believe this would directly conflict with the need to allow the industry to engage creatively with customers.”
Scott Finnie, product architect at Hymans Robertson responds to the Government’s recommendations for the pensions dashboard: “It’s paramount that consumers needs are kept at the heart of the pensions dashboard and it’s good to see that both the Government and the Work & Pensions Select Committee are united in this. People are crying out for simplicity when it comes to their pensions and the government needs to begin driving the necessary innovation in the industry to make this a reality.
“The Pensions Dashboard has the potential to catalyse new and creative ways for consumers to engage with their retirement savings. Surely a valuable contribution given the general concerns in this area given the current disconnect between people and their retirement savings.
“However, it’s important to recognise that any dashboard is only as good as the underlying data available to it. The government recognised this need when it launched open banking. It can make a similarly valuable contribution to the Pensions Dashboard initiative by driving the specification and adoption of standardised, secure access to underlying pension data. The work and pensions committee report clearly identifies three key objectives; giving people more choice to provide them with greater flexibility in later life, supporting consumers to make informed decisions about their retirement and enabling a more competitive, innovative retirement market.
“These are all worthwhile objectives and, secure and standardised access to underlying data is the engine that fuels all three. We support a government-sponsored initiative to drive those standards and compliance with them. Doing so would enable a government provided dashboard that consumers could trust as a reference point. It would also catalyse innovation in consumer engagement in line with the stated objectives.”
Commenting on the Government’s recommendations for a review of automated advice, Karen Brolly, Head of Products, Life and Financial Services, Hymans Robertson, says: “We strongly believe that digital tools are an ideal way to provide goal based approaches to financial planning. They ensure that individuals can achieve a desired income throughout their retirement. Using robust actuarial modelling, these types of tools are able to clearly and objectively take into account of all key risks that should be considered, such as investment risks, the level of income being withdrawn and, critically, a realistic forecast of life expectancy.”
• Right to defer any new interventions pending FCA’s Retirement Outcomes Review and DWP pension dashboard feasibility study
• Select Committee’s default decumulation pathways several steps too far
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