The Investment Association – the trade body for asset managers – has thrown its weight behind the drive for ‘targeted support’ for people approaching retirement as part of a wider series of recommendations to improve pension outcomes.
The association this week published a report listing several principles and recommendations for retirement and advice reform, including measures to ensure people can access sustainable, inflation-protected pension income.
At the end of last month, the Financial Conduct Authority published its plans for a ‘targeted support’ regime, with the aim of providing more people who cannot access financial advice with support and guidance about how best to draw their pension as income.
“Our recommendations underscore that retirement isn’t a one-size-fits-all journey – and today’s savers need the tools, support, and investment options to match that reality.”
Imran Razvi, Investment Association
In its report, ‘Investing for a better retirement’, the Investment Association said the policy would be “critical” in guiding defined contribution (DC) savers to “good retirement decisions and outcomes”.
It added that, for those who did not want to engage with this level of support, there should be a “backstop solution that keeps them invested while generating some income”.
The Pension Schemes Bill has introduced a requirement for DC pension schemes and providers to offer a default retirement product or service to cater for those who do not engage with their pension at the point of retirement. Several firms are already developing solutions, including Nest and TPT Retirement Solutions.
The Investment Association said: “Our proposal is that there is a strong emphasis on targeted support to encourage engagement rather than relying on defaults as is the norm during the accumulation phase.”
The association’s report also called for support for financial advisers to help improve retirement income advice, measures to ensure value for money in retirement, and for changes to fund rules to make it easier to provide flexible income services.
Richard Parkin, chair of the Investment Association’s retirement income committee, argued that the pensions and investment industries needed to “reframe” attitudes to risk and volatility to direct people “away from volatility of capital towards the variability of income”.
“The two concepts are related but very different,” Parkin said.
On changes to fund rules, Parkin explained: “In order to allow investment funds to distribute income more effectively and efficiently, changes will need to be made to regulation and tax laws. In particular, the restriction on distributing capital to supplement income and the requirement to distribute all income earned make it difficult for funds to deliver the stable and growing income consumers will need.”
Imran Razvi, senior policy adviser at the Investment Association, said the development of DC since pension freedoms had meant that people faced “a complex series of choices” around retirement and needed “informed, long-term planning and support”.
“Our recommendations underscore that retirement isn’t a one-size-fits-all journey – and today’s savers need the tools, support, and investment options to match that reality,” Razvi added.
“The financial services industry must work collectively to build stronger engagement with retirement planning, deliver more consistent support, and implement smarter regulation to empower the industry to deliver better outcomes for UK savers.”
