Older retirement savers need far more support from the pensions industry before making the “huge” decision about how to best use their savings pots, according to B&CE1, provider of The People’s Pension.
Speaking at the PLSA Annual Conference in Liverpool, Phil Brown, Director of Policy at B&CE, which supplies pensions to nearly six million people or 1 in 5 UK workers, said that current decumulation options favoured by pension companies meant that millions of ordinary workers were faced with complex decisions that many aren’t qualified to make.
He said that the unique longitudinal study, ‘New Choices, Big Decisions’2, that The People’s Pension first commissioned following the introduction of Pensions Freedoms in 20153, should be seen by the industry as evidence from which it can offer consumers alternative retirement solutions, such as pseudo-default retirement products.
He also challenged the industry to do more to help consumers not only make decisions on how to make their Defined Contribution savings last throughout retirement, but also to provide clearer details, so they are better informed before transferring their pension pots.
Mr Brown says: “After buying a home, how to use their defined contribution pension savings is the biggest decision many people will make – it’s huge. Through automatic enrolment we hold people’s hands and put them in pensions when they join companies, but then assume that they will be super engaged and make complex retirement choices that will impact their retirement for 30 or more years.
“The reality is that to make informed retirement choices, consumers need to be part financial adviser, part fund manager, part economist, part tax accountant, part doctor and maybe part futurologist. When somebody buys a house, we don’t expect them to do the property conveyancing, yet when it comes to what to do with their pension pots, we expect them to navigate an even more complicated area, despite not being equipped with the rights skills.
“Our ‘New Choices, Big Decisions’ research showed that many savers run out of money in retirement because they don’t understand either their own longevity or the impact inflation has on those savings.”
He has also called for pensions dashboards, which are due to be introduced in 2023, to display a scheme’s value for money credentials at the earliest opportunity.
He said: “The pensions transfers market is creating member detriment as members are, in some cases, using the wrong sort of information to make transfer decisions. It’s crucial that savers are aware of the impact of charges when brand or other factors are the main driver behind a transfer. We need to change the discussion to one about ‘Value for Money’ and dashboards must display this information as soon as possible to prevent poor decision making that is detrimental to member’s retirement outcomes.”
Notes to editors:
- B&CE is a not-for-profit organisation, which provides The People’s Pension, a leading workplace pension scheme, serving nearly six million pension savers across the UK. With no shareholders, it uses its profits to help people build financial foundations for life.
- New Choices, Big Decisions is in-depth research by consultancy Ignition House explores both retirement planning and spending habits following the introduction of freedoms in 2015. The report can be found here
- Pension Freedom and Choice were introduced in 2015, click link here