Leadership of DC summit: Panellists demanded a quick response from trustees and providers on defined contribution scheme design, following the introduction of the pension freedoms.
Under the new rules DC scheme members can access their pots via cash lumps sums and flexible drawdown, as well as through the more traditional route of buying an annuity.
Rachel Brougham, trustee executive at Bestrustees, told delegates at FTLive's Leadership of DC event on Tuesday there had been a wide range of action across schemes, driven in part by trustees’ reluctance to implement the additional post-retirement options within the scheme.
She said: “There’s definitely a diversity in terms of action on what they want to offer.
Drawdown has always been there, it’s just an expensive problem, which is why people can’t work out how to do [it]
Andrew Cheeseman, Pan Trustees
“There are a lot of schemes out there [that] don’t want that responsibility… but there are also other schemes [that] are working hard to try and find a way of facilitating drawdown options.”
Andrew Cheeseman, founder and chair at professional trustee company Pan Trustees, said a typical drawdown product currently available in the retail market might cost an individual £650 a year to run.
“If you work out the basis points on that, it’s just ridiculous,” said Cheeseman.
“Drawdown has always been there, it’s just an expensive problem, which is why people can’t work out how to do [it]."
Default behaviour
Dinesh Visavadia, head of pensions and benefits at drinks company Britvic's pension scheme, said the road had become “bumpier” approaching the April deadline, but added the industry now has a great opportunity to help members save in a much more "holistic" way.
But within this new savings environment Visavadia questioned whether current default fund provision would encourage the right sort of behaviour from members nearing retirement.
“I’m in two minds about the default strategy,” he said, adding: “In the new world, where we are thinking about freedom and flexibility, does it sit comfortably when you try to say to people, 'This is the default fund'?”
Jackie Wells, head of policy and research at the National Association of Pension Funds, said schemes need to be looking how to create a clearer pathway between the accumulation phase and decumulation.
Wells said discussion of post-retirement vehicles should focus on income in general rather than drawdown products.
“From the member perspective it’s all about income,” said Wells. “People want it to be easy.”
She said the ideal income-generating product for savers would have an element of inflation protection built in and would not run out over the course of a retirement.
However, she also said it should not demand significant ongoing work on the part of the member, but added: “We don’t want to encourage lazy behaviours. But equally, people do want someone to take on the task of helping them determine what a good outcome is for them… People don’t want to be ripped off."
