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How can providers support members when it comes to retirement decisions?
Effective retirement support starts with understanding members’ needs, and these can be very different. This isn’t just about pension pot size and financial considerations, it’s about recognising the different ways people manage their money and make decisions.
Some want a simple default option giving a good outcome, and minimising the time spent thinking about pensions. Others will want a clearer overview of their different options and to explore them in depth to find the very best solution for them. It is for this second group that we’ve developed the new Retirement Hub.
There’s been a lot of focus on guided retirement and defaults, which is crucial, but we don’t want to leave behind engaged members who aren’t taking advice.
What does the Retirement Hub offer?
This combines information, education and interactive tools to help people understand their options and feel confident making decisions about retirement. This includes the Retirement Options Calculator, where users input basic details (such as pension pot size) to get an indicative view of what they’ll receive from an annuity, what a sustainable drawdown income might look like, and the tax implications of taking different cash sums. It can also illustrate how these outcomes change using a blended mix of options.
Designed in clear, plain English the Hub is accessible and impartial, providing guidance rather than nudging people towards any particular outcome. It will also signpost users to further support when needed.
How does this complement Standard Life’s Mixed Income Builder (MIB) tool?
The MIB tool offers a more structured way to think through spending needs in retirement. The MIB tool helps people decide how much guaranteed income to target and how much flexibility they want. It’s often the first step before choosing whether to opt for a guided or default option, or exploring options in more detail via the Retirement Hub.
How will this fit into regulatory changes around advice and guidance?
The Retirement Hub offers guidance to members under the current rules. We see it as part of a future tiered ecosystem: open guidance tools for all; targeted support for those who need more tailoring; and full, paid-for advice for those wanting a personalised plan. Members need different levels of help at different times, so we are building a range of services to reflect that.
Providers will soon have to offer default decumulation options. How are you approaching this challenge?
Given members’ varied circumstances we’re creating a two-tiered approach. First a default decision framework that helps identify spending needs in retirement and the right mix of guaranteed and flexible income, by taking our existing Mixed Income Builder approach a step further.
Secondly, a set of default product solutions that can meet these different outcomes. This might include annuities for those looking for guaranteed income and security. We are also developing enhanced drawdown solutions for flexibility that will deliver a regular but sustainable income.
Are you adopting a ‘fix-and-flex’ or a ‘flex-then-fix’ approach when it comes to default options?
We favour a ‘fix-and-flex’ approach to ensure essential spending is covered with guaranteed income, including the state pension, DB entitlements and annuities, with remaining funds in more flexible drawdown arrangements. This can support higher spending in the earlier more active years of retirement.
‘Flex then fix’ can work for advised or highly engaged individuals but our research suggests many people don’t want to revisit retirement spending decisions at a later stage. Engagement with pensions often spikes in the run up to retirement but then drops away.
There are also practical issues around buying an annuity at a later date. Cognitive decline, market timing and the potential for drawdown pots to deplete at a faster rate than anticipated are all potential issues. Getting the structure of retirement spending set at the outset gives clarity and reduces the risks of unexpected problems later.
Who can use the Retirement Hub?
It is open to anyone — you don’t have to be a Standard Life workplace member to use the public version of this tool.
Retirement Hub: https://www.standardlife.co.uk/retirement
