Saver support in the decumulation stage is lagging, leaving members to make complex decisions alone or transfer out of scheme, a new report from The Pensions Policy Institute has found.
The report ‘Assessing the UK Retirement Income Market: Defaults, Active Choices, Innovation and the existing gaps and challenges for delivering VfM’ is the first in a series of reports examining what an assessment of Value for Money could look like in the decumulation stage of retirement.
According to PPI, two ‘informal defaults’ have emerged in the retirement income market; full cash withdrawals and passive continuation in accumulation strategies, both of which may be misaligned with long-term retirement needs.
Meanwhile, the market still faces advice and guidance gaps, with most savers, especially those with smaller pension pots, making decisions without support, while regulatory uncertainty limits how much help providers feel able to give.
In addition, data remains fragmented, with most information collected at the pot level, providing limited visibility across multiple schemes. This can make it difficult to assess outcomes or design better support mechanisms, the report found.
While recent policy developments and innovation offer potential, without alignment across the market, many savers may continue to fall through the crack, the PPI warned.
Mariana Garcia Requejo, senior policy researcher at the PPI, said: “This research marks an important first step in defining what ‘value’ might look like in decumulation. It plays a role in mapping savers’ needs and behaviours. The development of a more comprehensive evidence base is highlighted as both a challenge and an opportunity. Setting the direction for what data is relevant for the market to collect could guide us to the evidence needed to improve saver outcomes.”
Requejo added: “As DC pensions become the primary source of private retirement income, it is increasingly important that savers are supported to make sustainable choices.”
The PPI said this report sets the stage for the second report, due later this year, which will explore future opportunities to design a more effective retirement income market that can provide VfM for all savers.
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