PLSA publishes guidance for pension schemes to support saver decision-making at retirement

As pension scheme members become more reliant on their DC savings to fund their retirement, there is increasing attention and scrutiny on what pension schemes can – and should – do to support members convert their savings into an adequate and sustainable income. People’s needs and requirements in retirement are a lot more complex than in accumulation; while defined benefit (DB) schemes largely catered for this with low maintenance guaranteed incomes, choices open to DC savers are far more varied.

Navigating legal, regulatory and commercial issues

Against a backdrop of ongoing regulatory initiatives such as the FCA’s review of the advice/guidance boundary and the DWP’s continued work on value for money, the Government has indicated that a duty requiring pension schemes to provide products and services for members at retirement will be introduced in the announced Pension Schemes Bill.

While some schemes and employers provide access to paid-for financial advice at retirement, it is unusual for schemes to offer decumulation services themselves. Therefore, it is expected that many pension schemes will partner with third parties to offer savers access to a range of decumulation options.

Published in partnership with Eversheds Sutherland and LCP, DC Scheme Guidance on Retirement Arrangements and Partnerships aims to help trustees and employers manage the legal, regulatory and commercial issues connected with these partnership arrangements.

Clarity needed on a range of regulatory questions

Importantly, the guidance also highlights areas of focus for the Government and regulators to make the partnership process simpler and more accessible.

Specifically, the guidance calls on the Government and regulators to clarify the extent to which pension schemes can provide ‘nudges’ to members based on limited information about what people in similar situations typically do, and how support for savers would interact with the advice/guidance boundary. Trustees also need greater clarity about what constitutes a ‘commercial benefit’ in the context of partnership arrangements.

For trustees to have confidence of where their liability sits in relation to a partnership arrangement, the statutory framework needs to confirm when the trustees’ legal responsibility ends and provide a statutory discharge, subject to trustees’ implementing and reviewing the suitability of the retirement provision and partnership arrangement.

The document also calls for more guidance from DWP and TPR on the communications, guidance and risk warnings associated with decumulation solutions to establish how tailored schemes’ messages can and should be.

Ruari Grant, Senior Policy Lead at the PLSA, said: “In anticipation of a new duty being placed on pension trustees to offer greater support to members at retirement, this guide is intended to give trustees increased assurance and confidence in navigating the legal, regulatory and commercial aspects of providing decumulation guidance.

“Trustees want to help savers make better choices about how they access their pension in retirement, but several barriers remain. It is vital that the Government and regulators continue to engage with the pensions industry to ensure that the incoming legislation – and ongoing FCA rules – meet the needs of schemes and savers.”

Download the guidance from the PLSA member area.

Mark Smith, Head of Media Relations
020 7601 1726 | [email protected]

Cali Sullivan, PR Manager
020 7601 1761 | [email protected]