What can the pensions industry do to help savers plan their finances?

As we head into what will be a challenging winter for many people, faced with the increasing pressures of spiralling costs, what can the pensions industry do to help savers plan their finances? This is a question that we will be leading with at the forthcoming PLSA Annual Conference – Today’s challenges, tomorrow’s solutions – in Liverpool this October.

The question is an obvious one for the PLSA because our fundamental mission is to help everyone achieve a better income in retirement. This includes ensuring that people have the right support at retirement when deciding what to do with their hard-earned pension savings.

Currently, this complex decision-making phase – known in the industry as DC decumulation – can be a minefield for retirees. The problem is that the level of support currently on offer depends on a number of factors including access to financial advice – usually only a reality for wealthier savers. And while Pension Wise provides a free guidance service, there isn’t yet the uptake that we would like to see.

Another factor is scheme type. Contract-based pension providers are currently required to offer default investment pathways for their customers, although not at the level of support we believe savers require, as discussed in our Call for Evidence submission.

And as yet, there isn’t any requirement on trust-based schemes to provide support, and due to the fear that ‘guidance’ could be perceived as ‘advice’, many of these types of schemes avoid it altogether.

We think retirees would benefit from a framework that provides more reliable support irrespective of their circumstances.

We are pleased to see some of the large Master Trusts developing innovative in-scheme retirement products and guidance, as discussed in our recent report.

However, the question remains over how to help those savers who are in a scheme, typically a single-employer trust, which will not provide such in-scheme support. The PLSA’s Guided Retirement Income Choices proposal puts forward an approach whereby trustees are obliged to signpost retirees outside of their scheme to a trusted provider of retirement solutions which meet a set of agreed standards. We believe this is the best way to give providers the confidence they need and savers the support they require.

Capacity within existing Master Trusts and providers would need to develop quickly to accommodate this activity, but it is necessary to provide for the best retirement outcome for the increasing number of savers retiring with predominately DC savings.

We will continue working with government, regulators and the industry on developing a framework that supports all savers – irrespective of their circumstances and scheme type – when turning their pension savings into a retirement income.

DC decumulation is a topic that will be discussed at conference – though possibly under a more catchy title - so please do join us in Liverpool to be part of the debate at the biggest pensions event of the year. Together we can meet the challenges. For today, tomorrow, and for all of us.