The Government has rejected this recommendation (see excerpt from full response below). Commenting, Steve Webb, Director of Policy at Royal London said: “The Government is right to reject the idea of a one-size fits all approach at retirement. The whole point of pension freedoms is that everyone is different and has a different pension history and different goals for the future when they reach pension age. Much more can and should be done to help people make the choice that is right for them, but defaulting them down the route that the provider thinks is best is not the answer”.
The DWP response also says that on the pensions dashboard, there is a ‘strong case for compulsion’. Steve Webb added:
‘It is very welcome that the Government seems to have accepted the case for participation by pension schemes in the dashboard project to be mandatory. Without this, people would only be able to see a partial picture of their pensions. We now urgently need to see the DWP feasibility study so that the project can be driven forward’.
The DWP response can be found here:
The section on ‘default pathways’ is under Recommendation 2, and the DWP says:
“The Committee recommends the Government take forward FCA proposals to introduce default decumulation pathways. The Government notes that the proposals explored by the FCA in its interim report of the Retirement Outcomes Review differed somewhat from the Committee’s recommendation: the FCA’s emphasis was on consumers actively choosing particular retirement outcomes and providers being encouraged to offer pathways to suit those choices.
The Government is, at this stage, not convinced of the merits of default decumulation pathways and is concerned that measures to require individuals to be placed into particular products would be inconsistent with the freedom and choice reforms. The pension freedoms have deliberately moved away from the idea of defaulting individuals into a single product, namely annuities.
There is insufficient evidence to suggest a common default pathway would be suitable for the majority of people at this time, particularly given that most people reaching retirement with DC savings now and in the coming years will also have other retirement provision to take into account in their planning. Pension providers necessarily have a limited view of their customers’ financial position.
The FCA noted in their response to the Committee that “consumers’ needs and circumstances differ significantly in decumulation, so a default pathway may not be appropriate for all of them.”
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