In its report, Retirement Choices: The Evolution of Products and Support, the PLSA says there is a lot of work being undertaken within the industry by pension providers, schemes and Master Trusts. However, a ‘framework’ that outlines the real-life choices savers need to make, may help them make better, informed decisions on action to take with their pension pots.
The report notes that since the pension freedoms came in during 2015, individuals have been faced with a series of very important and also very complex decisions to take at retirement with regard to how they spend their life savings.
With most savers no longer buying a guaranteed income, the risks of running out of money – either due to an unsustainable withdrawal rate, or through cash investments losing money in real terms – have grown, so people need help to understand the choices they need to make.
The report finds that pension schemes and providers possess the knowledge that retirees need to get good outcomes, so the PLSA is encouraged that this expertise is being harnessed with increasing numbers of Master Trusts and insurers building models which seek to guide their members through their retirement income options.
And the range of those options is growing too. There is wide consensus across the industry that no single product can provide for all of someone’s needs over what could be a 30-year retirement, so increasing focus is being placed on how to help people overcome this hurdle. More and more providers are therefore offering and developing comprehensive solutions which include both flexible withdrawals and a guaranteed income, complementary facets of a product which address their changing needs as they progress through retirement.
Furthermore, as providers embed such solutions for their own members, they will naturally begin to open them out to the wider market, where we are seeing increasing demand from single-employer trust-based pension schemes.
Previously, the PLSA has called for a new set of product, communication and governance standards, underpinned by legislation, to pave the way for pension providers to give greater support to savers at retirement. And, from working with its members, the PLSA knows that workplace pension schemes already want to be major part of the solution which has led to the proposal of the Association’s Guided Retirement Income Choices (GRIC) as a possible solution.
These proposals were made by the PLSA around three years ago, and as more people retire with DC pensions, while DB declines, the need for more retiree support has only grown since then. This report assesses the extent to which the market is evolving and solutions like this are coming to the fore.
Nigel Peaple, Director of Policy & Advocacy, PLSA, said: “Throughout 2022 we’ve been speaking to pension schemes and providers across the industry to find out what support savers have on offer, and we’ve published this market evolution report to inform the DWP’s timely Call for Evidence. The market has without doubt moved on in recent years - among the Master Trusts in particular - but the hard work will be in ensuring the support people need for a safer and more valuable retirement is available for all, irrespective of what kind of pension they have.
“The PLSA’s view is that guidance is best provided by schemes themselves, and that most people need access to a range of retirement products which cater for their changing needs. We discuss our Guided Retirement Income Choices proposal within our report, and hope ideas such as this will complement the DWP’s policy work. Following the publication of this report, we will continue to engage with government, providing the full insight afforded by our membership, as they shape the environment for future pensioners.”
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