The Pensions Administration Standards Association has published new guidance on the proposed new default retirement income solutions.
It highlights this change as a “once-in-a-generation operational challenge” for those running schemes and says it will “fundamentally reshape” DC administration.
These proposed changes will require DC schemes to offer a sustainable income option to members as a default at retirement. But PASA warns that these reforms may not improve member outcomes if there isn’t early planning and close collaboration across the industry. It say this is required to ensure this policy change delivers for pension savers.
The new guidance issued today focuses on the practical realities of delivery, highlighting the scale of change required across systems, processes and governance frameworks.
It emphasises administration will play a critical role in determining whether policy ambitions translate into better outcomes for savers.
With master trusts expected to implement default retirement solutions from 2027, PASA says administrators have a limited window to design, build and deliver new capabilities. These include member segmentation, data collection, default decision-making, pension payroll, tax processing and ongoing governance.
The pensions trade body also identifies a number of key risks, including system strain, data challenges, increased complexity and the need to support vulnerable or disengaged members more effectively.
The guidance outlines a series of actions administrators should take now, including assessing system readiness, engaging with trustees, exploring delivery models and strengthening communication strategies.
PASA will continue to work with industry stakeholders to support the development of practical, deliverable solutions as further regulatory detail emerges.
PASA chair of its DC working group Jessica Rigby says: “Default retirement represents a fundamental shift in how pension schemes support savers at retirement. The direction of travel is clear, with a renewed focus on delivering sustainable income rather than simply providing access to pension savings.
“While the policy intent is strongly supported, delivery will be complex. Many existing administrative processes were not designed for ongoing retirement journeys or income provision, and significant change will be required across systems, data and operations.
“This guidance focuses on the practical steps needed to prepare. Early engagement between trustees, administrators and providers will be critical to ensure solutions are deliverable, scalable and aligned with member needs. Without this, there is a real risk operational challenges could constrain what can be achieved in practice.”
David Fairs, PASA Chair, adds: “These reforms reinforce the growing recognition of administration as a critical enabler of good member outcomes. Administration is no longer a back-office function, it sits at the centre of delivering policy intent and supporting savers through increasingly complex retirement journeys.
The industry has an opportunity to demonstrate its strategic value, but this requires realistic planning, investment and collaboration. Administrators must be involved early in decision making to ensure proposed solutions can be delivered effectively and sustainably.
This paper provides a timely reminder that success will not be judged by design alone, but by how well these changes work in practice for savers.”
Lumera commercial director, data and dashboards, Maurice Titley says: “PASA’s paper on administration and the system implications of default retirement pathways is a helpful guide at a time when the industry is looking beyond significant regulatory change to successful implementation.
“Default retirement pathways have the ability to generate more predictable retirement journeys and improve member engagement. However, it requires platforms that can rapidly adapt to changing requirements.
“Given additional reform across the pensions market, demands on administration and the technology that supports it are only likely to accelerate over the coming years. It emphasises how crucial it is for schemes and providers to retire technical debt decisively, standardise data structures and adopt platforms that are truly designed for scale and innovation.”
Trustees, administrators and scheme sponsors can access a copy of the guidance here.
