05 September 2023
If you are covering the closing of the decumulation consultation today titled ‘Helping savers understand their pension choices,’ please see the following comment from Jon Greer, head of retirement policy at Quilter:
"With the DWP's consultation on decumulation closing, the private pensions landscape is at a defining juncture. The rising membership in Defined Contribution (DC) schemes, juxtaposed with new pension freedoms, demands urgent attention.
"It's clear that trustees need to be at the forefront, proactively offering solutions and the results of this consultation will hopefully help them do so. Ultimately, the ideal approach should empower members to opt for lump sums, annuity purchases, drawdowns, or a blend of these.
"Smaller schemes, particularly those with assets under £100m, face their own set of challenges. While it's commendable to propose services offering guidance, advice, or even a brokerage for these, the line between trustees providing personalised offerings and offering regulated financial advice is something to be mindful of so that it does not stifle the effectiveness of the proposals; a keen eye on the advice/guidance review will be important.
"While a tendering process set out in legislation for trustees to partner with providers is on the table, it feels overly complex. The question of liability, especially when a consumer is dissatisfied with a partner selected by the Trustee, remains ambiguous - at which point does the trustee's responsibility end and the partner's commence – ultimately will this be determined via the Ombudsman in the future?
"One aspect is unmistakably clear: if trustees collaborate with a provider for decumulation, it essentially translates to an 'in-house' provision from the members perspective. Members are likely to gravitate towards this default, potentially side-lining the broader market. While some argue that a competitive market would naturally form through providers vying for business, once established, where's the incentive to stay competitive?
"Instead of complicating the landscape with intricate frameworks, perhaps a more streamlined solution is in order. Envision every DC Trust-based scheme that doesn't offer decumulation options requiring its members to attend Pension Wise appointments. This could be a mandated approach for all DC members, barring those with a financial adviser. Those Pension Wise appointments would be there to help members understand how they can turn their pension pots into pension incomes. There are myriad online tools, like the Maps annuity comparator to name but one, that could be harnessed to assist members with the journey."
