On the go: The Pensions and Lifetime Savings Association has called on the government to introduce legislation underpinning a new set of product, communication and governance standards to build on pension freedoms and provide greater support for savers at retirement.
In its response to the Work and Pensions Committee’s inquiry into pension freedoms, the PLSA highlighted that there remain “significant barriers to providing suitable decumulation options that better deliver appropriate retirement income choices”.
“Crucially, these include evidence that savers are not in a position to assess which options are best for them, and that schemes are deterred from offering the right solutions due to litigation and regulatory risks. Our proposals will address these barriers,” it said.
In its response, the PLSA called for a new statutory obligation on pension schemes, “designed according to appropriate governance standards”, that would require them to provide “helpful guidance and signposting to suitable products”.
As part of its response, the PLSA proposed a new “guided retirement income choices” framework, which it said would allow product providers “to build retirement income solutions that blend the best features of cash, drawdown and annuity products commonly used for retirement today”.
It made clear that its new framework is designed to build on, not to replace, existing regulatory approaches and guidance services, developing “blended solutions that are more appropriate for future retirees”.
“For example, under our approach, the government-backed MoneyHelper service [formerly the Money and Pensions Service] would play an essential role in providing impartial, non-commercial guidance,” the PLSA said.
New solutions are essential because many people struggle to receive the guidance and advice they need to make informed decisions, and weak engagement levels are unlikely to see guidance take-up rates increase, it added.
“The real and perceived cost of advice is also likely to be a deterrent for the average saver,” the PLSA continued .
“In our view, the future decumulation market will instead need to include a wraparound advice model, including simplified advice alongside innovative, mass market solutions to provide support and enhanced guidance.”
The new framework would also look to build on investment pathways — which typically focus only on the next five years — by marrying them with a requirement that schemes support members in retirement.
Nigel Peaple, director of policy and advocacy at the PLSA, said: “The pension freedoms revolutionised the way in which people can access their pension savings; now it is time to build on them to support people in making the retirement decisions that are right for them.
“As the pensions system matures we want schemes to be able to provide better information and more suitable, blended products to help savers manage the opportunities and challenges they encounter, while continuing to offer a full range of choice and freedom,” he continued.
“Guided retirement income choices is a framework that allows schemes to more effectively help savers balance the longevity, inflation and investment risks they face to make the most of the opportunities they have at retirement.”
