Pension savers would benefit from a framework that outlines their real-life choices as the risk of running out of money in retirement continues to grow, the Pensions and Lifetime Savings Association says.
In its report, Retirement Choices: The Evolution of Products and Support, the PLSA says pension providers have taken steps to help savers make informed decisions, but savers require more help to understand the choices they need to make.
Since the introduction of the pension freedoms in 2015, individuals have been faced with a series of complex decisions to take at retirement with regard to how they spend their life savings. The PLSA says that with most savers no longer buying a guaranteed income, the risks of running out of money, either due to an unsustainable withdrawal rate or through cash investments losing money, have grown.
The report finds that pension schemes and providers possess the knowledge that retirees need to get good outcomes and the range of options available to pension savers is growing.
The industry body said there is a “wide consensus across the industry that no single product can provide for all of someone’s needs over what could be a 30-year retirement” so increasing focus is being placed on how to help people overcome this hurdle. Furthermore, as providers embed such solutions for their own members, they will naturally begin to open them out to the wider market, where there is growing demand from single-employer trust-based pension schemes.
Nigel Peaple, director of policy and advocacy, PLSA, said: “Throughout 2022 we’ve been speaking to pension schemes and providers across the industry to find out what support savers have on offer and we’ve published this market evolution report to inform the DWP’s timely Call for Evidence. The market has without doubt moved on in recent years – among the Master Trusts in particular – but the hard work will be in ensuring the support people need for a safer and more valuable retirement is available for all, irrespective of what kind of pension they have.
“The PLSA’s view is that guidance is best provided by schemes themselves and that most people need access to a range of retirement products which cater for their changing needs.”
The PLSA previously called for a new set of product, communication and governance standards, underpinned by legislation, to pave the way for pension providers to give greater support to savers at retirement. It said that workplace pension schemes already want to be a major part of the solution which led to the proposal of the Association’s Guided Retirement Income Choices as a possible solution. This latest report assesses the extent to which the market is evolving and solutions like this are coming to the fore.
Peaple added: “We discuss our Guided Retirement Income Choices proposal within our report and hope ideas such as this will complement the DWP’s policy work. Following the publication of this report, we will continue to engage with government, providing the full insight afforded by our membership as they shape the environment for future pensioners.”
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