The Pensions and Lifetime Savings Association (PLSA) has published new guidance to ensure employers and DC trustees offer better support to members when taking retirement benefits.
The PLSA points out there is now increased attention and scrutiny on what pension schemes should do to support members when converting retirement savings into an adequate and sustainable income.
This is a growing concern with members becoming more reliant on DC savings, and a more complex array of options available post pension freedom rules.
The PLSA says that members needs and requirements in retirement are more complex than during the accumulation stage — although many trustees and employers tend to focus on this growth phase. It adds that retirement needs were largely catered for with DB schemes offering a low maintenance guaranteed incomes.
This new guidance comes against a backdrop of ongoing regulatory initiatives such as the FCA’s review of the advice/guidance boundary and the DWP’s continued work on value for money.
The Government has also indicated that a duty requiring pension schemes to provide products and services for members at retirement will be introduced in the announced Pension Schemes Bill.
While some schemes and employers provide access to paid-for financial advice at retirement, it is unusual for schemes to offer decumulation services themselves. Therefore, it is expected that many pension schemes will partner with third parties to offer savers access to a range of decumulation options.
This PLSA guidance is published in partnership with Eversheds Sutherland and consultants LCP — with the DC Scheme Guidance on Retirement Arrangements and Partnerships aiming to help trustees and employers manage the legal, regulatory and commercial issues connected with these partnership arrangements.
The PLSA is also urging the government and regulators make the partnership process simpler and more accessible.
Specifically, the guidance calls on them to clarify the extent to which pension schemes can provide ‘nudges’ to members, based on limited information about what people in similar situations typically do, and how support for savers would interact with the advice/guidance boundary.
It says trustees also need greater clarity about what constitutes a ‘commercial benefit’ in the context of partnership arrangements.
For trustees to have confidence of where their liability sits in relation to a partnership arrangement, the statutory framework needs to confirm when the trustees’ legal responsibility ends and provide a statutory discharge, subject to trustees’ implementing and reviewing the suitability of the retirement provision and partnership arrangement.
The document also calls for more guidance from DWP and TPR on the communications, guidance and risk warnings associated with decumulation solutions, to establish how tailored schemes’ messages can and should be.
PLSA senior policy lead Ruari Grant says: “In anticipation of a new duty being placed on pension trustees to offer greater support to members at retirement, this guide is intended to give trustees increased assurance and confidence in navigating the legal, regulatory and commercial aspects of providing decumulation guidance.
“Trustees want to help savers make better choices about how they access their pension in retirement, but several barriers remain. It is vital that the Government and regulators continue to engage with the pensions industry to ensure that the incoming legislation – and ongoing FCA rules – meet the needs of schemes and savers.”