The Pensions and Lifetime Savings Association (PLSA) is calling for the establishment of a new regulatory framework to help savers with the complex decisions they face accessing their pension at retirement.
The PLSA says its proposals received widespread industry support, following a a three month consultation on this proposed DC decumulation framework.
Following this process the PLSA said details of its proposals have been enhanced, refined, clarified and added to.
Importantly, the PLSA believes there needs to be a statutory requirement on pension schemes to support their members when they are making decisions about how to access their pension.
The framework will also deliver a set of minimum standards for the saver communication and engagement journey as well as product design and governance.
This new framework is designed to meet several key objectives:
- To provide more support to savers who do not engage with their options, utilising the lessons from automatic enrolment and the open market option
- To facilitate and influence future product development with a view to managing the risks for savers as DC pots grow and dependency on DC derived incomes increases
- To utilise the benefits of scale and mechanisms such as the trust-based fiduciary duty within master trusts and trust-based schemes and the responsibilities of Independent Governance Committees
- To support similar saver experiences across the market, whilst enabling innovation to flourish
- To mitigate or help manage some of the risks savers are facing
- To mitigate some of the key risks schemes are facing – including litigation, financial and operational risks
The PLSA said this frame work was an evolution of the pension freedom rules, which continued to offer savers choice, but also provided the support many needed with these decisions.
PLSA policy board chair Emma Douglas says: “The pension freedoms radically revised the journey for savers when they reached retirement, bringing new opportunities, challenges and risks to savers and pension schemes.
“The decumulation framework we are recommending today responds to the evolution of the pension system. It will provide vital support to savers and help bridge the gap between the inertia which makes automatic enrolment such a success, and the range of choices (which can be confusing) savers face when electing how to draw their pension at retirement.”
PLSA head of DC, master trusts and lifetime saving, Lizzy Holliday says: “We are extremely grateful for the quality of responses and engagement during the consultation period.
“Driven by our mission to help everyone achieve a better income in retirement, our recommended framework is designed to provide pension schemes with the certainty to better support savers with their at-retirement decisions and seeks to place savers at the heart of at-retirement policy and delivery.”