First 100 days of Government: help savers navigate choices at retirement

Until 2015, accessing your pension meant – for most people – converting a pot of money into a guaranteed income for life. But since the pension freedoms were introduced, over 55s have had a much wider choice over what to do with their pension. With this increased flexibility, has come increased responsibility, with savers suddenly exposed to an array of potential risks surrounding what for many, will be the biggest financial decision of their lifetime.

With most people having accumulated a pension through inertia few are equipped to make such important and complex decisions balancing longevity, inflation and investment risks to ensure they enjoy a comfortable retirement without running out of money.

Some support is already on hand, through professional advice and guidance services, and we are very supportive of these, especially those that are free and available to everyone, such as Pension Wise and Money Helper. But these require an active decision from the retiree to seek help, and come with capacity and cost constraints, so, as research bears out, they inevitably only assist a small proportion of people.

Since the General Election was called, and with emerging data showing that in many cases savers are using their pension pots to meet short-term cash needs - rather than to provide a sustainable income through their retirement - there has been some speculation in the media that, should Labour win, they may opt to row back the Pension Freedoms entirely.

We believe this is not likely. Not least because the current Government, through the start of a consultation process, has begun to lay the foundations for a solution that will help disengaged savers default to better retirement solutions and protect them from the worst outcomes the new risks expose them to.

Our mission at the PLSA is to help everyone achieve a better income in retirement. As such we would like to see more savers getting fuller support from their providers in decumulation and more innovation in this space.

That is why we are now calling on the new government, in its first 100 days, to take necessary steps to adopt the PLSA’s Guided Retirement Income Choices (GRIC) proposals, to support retirees with the complex decisions they face, irrespective of what kind of pension or provider they have. The key elements of the framework are:

• To guide and inform savers – a saver engagement journey, informed by behavioural economics, and deploying a ‘path of least resistance’ that enables schemes to signpost savers to a retirement solution either inside or outside the scheme.
• To deliver well-designed solutions – a set of minimum product standards that require schemes, who are better able than savers, to trade off the numerous and complex risks faced at retirement.
• To support schemes to deliver the framework – key governance minimum standards to underpin the design and delivery of the above elements.

What we need the Government to do is introduce legislation that will place a statutory duty on trustees to offer decumulation support and guidance for savers.

Click here to read what other action the PLSA is calling on the next Government to enact in its first 100 days to help everyone achieve a better income in retirement.

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