At-retirement functionality is extremely varied and decumulation product innovation and support is in its infancy, a report from Corporate Adviser Intelligence into workplace pension providers reveals. (DOWNLOAD THE REPORT HERE).
The report found that while the ability to facilitate partial tax-free cash withdrawal is the most important at-retirement functionality requirement for workplace pension, four master trusts do not offer this.
Partial uncrystallised funds pension lump sum (UFPLS) withdrawal is the second most important at-retirement functionality requirement for advisers, found the research, yet five master trust providers do not offer it.
The report finds that while contract-based providers typically offer all or the great majority of at-retirement functionality options, the picture is considerably more varied amongst master trusts.
All but four master trusts offer flexi-access drawdown, but seven do not facilitate drip-feed drawdown.
Multi-goal, multi-wrapper bucketing functionality is an emerging option, offered by four providers.
But master trusts perform better on facilitating the storing of client data relating to assets other than their pension held in their scheme, with around a third doing so, whereas no contract-based providers do.
The research found most master trusts do not have an income target or declare a sustainable withdrawal rate for their post-retirement strategies.
Five master trusts allow DB transfers where the adviser has given a negative recommendation, whereas two contract-based providers do. Just six out of 19 master trusts facilitate adviser charging for ongoing advice. Five out of seven contract-based providers do.
Report co-author and Corporate Adviser editor John Greenwood says: “The ability to make withdrawals efficiently and to manage money effectively into retirement are two of the big priorities for defined contribution pension savers as they move into decumulation. Yet on both counts, many providers operating in the industry are some way off delivering.
“Much has been achieved in the nine years since the launch of auto-enrolment, but at-retirement functionality and support, particularly in the realm of non-advised decumulation solutions, is still in its infancy and product development has been minimal.
“The proportion of retirees relying solely on DC pensions is increasing every year, and the majority of them are not receiving financial advice. At-retirement product innovation that has been mooted for years is needed soon.”
