Progress has been made by the pensions industry to help savers make informed decisions about what to do when they retire, according to a report from the Pensions and Lifetime Savings Association (PLSA).
In the wake of the Department for Work and Pensions (DWP) issuing its call for evidence on helping savers understanding their pension choices, the Retirement Choices: The Evolution of Products and Support report found there is a lot of work being done by the industry in this area.
However, the report noted that a framework that outlines the real-life choices savers need to make may help them make better, more informed decisions on what action to take with their pension pots.
Additionally, the report noted that since the pensions freedoms came in during 2015, individuals have been faced with a series of very important and complex decisions to take at retirement with regard to how they spend their life savings.
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 in real terms – have grown, so people need help to understand the choices they need to make .
The report also found that pension schemes and providers have the knowledge that retirees need to get good outcomes, so the PLSA is encouraged that this expertise is being harnessed with increasing numbers of master trusts and insurers building models that seek to guide their members through their retirement income options.
The range of those options is growing too, the report found, with 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.
Previously, the PLSA called for a new set of product, communication and governance standards, underpinned by legislation, to pave way for pension providers to give greater support to savers at retirement.
PLSA director of policy & advocacy, Nigel Peaple, commented: “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.
“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.”