The Department for Work and Pensions is gathering views on support available to scheme members when making savings decisions, and is questioning the industry on whether Nest’s current offering is sufficient.
In a call for evidence published on June 14, the DWP said it wants to understand what support and decumulation products are on offer to members, and what may be offered to them in the future.
Specifically on the government-backed master trust, government officials are interested in gathering views on the current offer available to its members, and whether there is a role for it to further develop what it offers.
After the introduction of pension freedoms, Nest introduced uncrystallised funds pension lump sums so that members can access their full pot as cash or take regular withdrawals — alongside having the option to transfer to another pension scheme or purchase an annuity from the open market, the document said.
Most people will have modest pension pots and no access to financial advice, so they need products which will work for them without needing active engagement or investment expertise
Sir Steve Webb, LCP
In March 2020, Nest introduced its guided retirement fund which is an investment solution designed to provide life-long sustainable withdrawals using UFPLS, it added.
But the government will look at whether Nest should be “able to deliver the full range of income solutions for members unwilling or unable to access decumulation options without support”.
Call for evidence follows FCA measures
Overall, the call for evidence is aimed at individuals who want to understand savings and welcomes input from pension scheme members, consumer organisations, as well as trustees and scheme managers.
The consultation builds on research by the Financial Conduct Authority, which found that many people who save into a pension scheme choose the “path of least resistance” when it comes to accessing their pot.
Individuals often take an income from their current pension provider without shopping around for the best product, or without being aware of how their savings are being invested.
Based on this research, the FCA introduced measures for personal pensions, aimed at supporting people to get the most out of their pension savings.
The DWP said it wants to achieve similar and hopefully even better outcomes for people saving into occupational pensions.
Pensions minister Guy Opperman said: “Deciding how to use your workplace pension savings is one of the most important financial decisions many people will make.
“Automatic enrolment has introduced over 10.6mn people to pension saving, and we want to ensure the record number of Brits now saving for retirement have the support and information they need to make informed choices about accessing their hard-earned savings.”
The DWP said those saving into these pensions should also have access to support that allows them to make informed decisions and achieve what they want from their pensions.
Post-retirement landscape needs more attention
Former pensions minister and LCP partner Sir Steve Webb welcomed the government’s move, but said there needs to be more focus on the post-retirement landscape.
“One priority for the DWP will be to focus not just on what happens at retirement but also on the journey through retirement,” he said.
“Most people will have modest pension pots and no access to financial advice, so they need products which will work for them without needing active engagement or investment expertise.”
Webb added: “The idea of a ‘flex first, fix later’ pension could be one such product, combining the best of both worlds — the flexibility and growth potential of drawdown and the certainty of a late life annuity. I hope that this DWP consultation will give proper attention to what happens post-retirement, as the right strategy at retirement may not be the right strategy 10 or 20 years later.”
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The call for evidence aims to find out, in particular from people saving into workplace schemes, what information and support they expect in the lead-up to taking their pension, at the point when they want to access their savings and after they have started to use their savings.
The DWP said it is also essential to understand from schemes what support is on offer when their members make these decisions and what schemes are considering offering their members in the future.
The call for evidence will run for six weeks and will end on July 25.
The DWP said the responses to this call for evidence and other stakeholder engagement will inform its policy position.
