Topic: Retirement saving

New Childcare Act expansion could boost UK pension savings by £1.2 billion

A recent expansion of the Childcare Act could increase the retirement savings of parents by £1.2 billion according to new analysis from leading workplace pension scheme The People’s Pension1.

The Childcare Act2, which was introduced in 2010 to provide 15 hours of funded childcare per week for three and four year olds, was this month expanded to working parents of children from nine months to school age. It is estimated that it will allow 60,000 parents to re-enter the workforce once fully implemented3.

The People’s Pension has calculated that this increased workforce participation could result in a significant increase in pension contributions. At total pension contribution rates of 8%, parents returning to full-time employment could save £333 million over the period in which they benefit from additional childcare funding. This is estimated to grow to £1.2bn at retirement age4.

If contribution rates are increased to 12%5, parents could save just shy of £500m into their pensions, estimated to result in around £1.8bn in additional savings at retirement age.

The individual impact of this would be significant, increasing the pension pot of each individual who returns to work by nearly £20,000, potentially meaning they can retire as much as a year earlier.

While the recent expansion of funded childcare is expected to make it more financially viable for parents to return to full-time employment, even those returning on a part-time basis could substantially increase their pension pots. The People’s Pension estimates that workers returning on a part-time basis6 could contribute an additional £177m to their pensions, resulting in £625m more at retirement.

Nicola Sinclair, Head of Responsible Business at People’s Partnership, said:

“As a nation we are not saving enough for retirement, so it’s encouraging to see that the Childcare Act has the potential to increase workforce participation to a point where it could significantly boost retirement savings across the UK. As well as offering much needed support to young families today, the Act can empower parents to take proactive steps to strengthen their long-term financial wellbeing.


“Having children is a huge life moment and one with big implications for personal finances, but so is retirement. We are encouraged to see the Act has the potential to help with both, immediately and long-term.”

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The People’s Pension calls for greater transparency and collaboration in response to FCA pensions consultation

The People’s Pension1 has published its response to the Financial Conduct Authority’s (FCA) discussion paper on adapting the regulatory framework for a changing pensions market.

With millions of UK savers relying on workplace pensions for their retirement, The People’s Pension is calling for greater transparency and industry-wide collaboration to ensure pension transfer decisions are made in the best interests of savers.

The impact of misinformed transfers

Research from The People’s Pension highlights the significant impact that pension transfers can have on long-term retirement outcomes. Analysis shows that individuals could miss out on as much as 20% of their pension savings due to misinformed transfer decisions, equating to a potential loss of £1.2bn across the UK in just one year.

Further research, conducted in partnership with the Behavioural Insights Team (BIT), found that financial incentives such as free cash offers can lead savers to transfer their pensions without fully considering the long-term consequences. Additional research with Ignition House found that many struggle to assess the impact of pension charges, with some assuming that any fee under 1% is the same, despite the potential for significant financial differences over time.

Five key reforms to improve pension transfers

In response to the FCA’s consultation, The People’s Pension is calling for five key reforms to create a more transparent and consumer-focused pension landscape:

  1. Clear, comparable pension information: A requirement for pensions providers to display simple, comparable, and easy-to-find information on investment performance, charges and customer service.
  2. A ban: Pension transfer incentives to be banned.
  3. A consumer-focused Value-for-Money framework: Pension providers and regulators to work together to create a consumer facing Value-for-Money framework to help savers make more informed decisions.
  4. Delaying commercial pension dashboards: Commercial pension dashboards to be delayed until Value-for-Money metrics are displayed across all pensions.
  5. Mandatory scheme comparisons during transfers: An obligation on the receiving  pension scheme to flag important differences between pension schemes, which may impact the final retirement pot, when processing a transfer.

A more transparent and saver-focused future

Patrick Heath-Lay, CEO of The People’s Pension, said:

“For too long, savers have been left in the dark when making pension transfer decisions – that needs to change. We’ve been campaigning for a step change in transparency, and this consultation is a crucial moment to fix a system that isn’t working in saver’s best interests.

“Our five-point plan sets out practical reforms that would create a more transparent and consumer-focused pensions landscape, helping to secure better retirement outcomes for millions of UK workers. This would ensure people can make informed choices about their future,. While the consultation is a step in the right direction, the industry must now work together to make it happen.”

The People’s Pension looks forward to working with the FCA and the wider industry to implement reform and ensure pension savers receive the clarity and protection they need when making important financial decisions.

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The People’s Pension unveils personalised video statements to simplify pensions for its members

The People’s Pension1 has launched new personalised video statements to help its members better engage with their retirement savings.

The video statements will be securely delivered by the biggest independent UK master trust directly to members via their online account and will include personalised audio and messages that are specific to the individual account. Within the video statement, the member will see how much they and their employer have added into their pot, any tax relief, and result of investment performance. The statement will also show the member the total amount in their pot.

The new personalised video statements will complement members’ annual statements which they will continue to receive either in the post or digitally.

This is the latest innovation in the last 12 months from the not-for-profit organisation, following the launch of a new set of retirement planning tools, member app and financial well-being offering.

Commenting on the launch of video statements, David Meliveo Chief Commercial Officer of People’s Partnership, provider of The People’s Pension, said:

“We continue to improve what we offer our members and the companies they work for, and I am incredibly excited to announce the launch of personalised video statements. It’s another significant step forward for our aim of making pensions simpler, more accessible, and engaging for our members.

“As a company that manages 1 in 5 of the workforce in the UK, it’s important that we find different ways for our hard-working membership to better engage their pensions, enabling them to make better informed decisions about their future.”

A recent study2 of marketing video statistics has revealed that 91 per cent of people have watched an explainer video to learn more about a product or service, and when asked how they’d like to learn about a product or service, watching a short video was preferable (44 per cent).

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Next phase of auto-enrolment should focus on flexing pension saving

The first decade of auto-enrolment has improved private pension coverage and boosted people’s pension pots. The Government should now make the next decade focus additionally on flexing pension savings – in order to address the different savings challenges that low, middle and higher earners face – according to major new research published today (Thursday) by the Resolution Foundation.

The report Perfectly Adequate? – funded by People’s Partnership, provider of The People’s Pension to 6.7 million savers – examines whether low, middle, and high earners are saving enough for a decent income in retirement, and what this means for the new Government’s Pensions Review.

The report notes that the Pensions Commission’s first landmark report 20 years ago set benchmarks for assessing whether people were saving enough for a decent income in retirement, known as target replacement rates.

These targets – achieving a pension income equivalent to 80 per cent of pre-retirement earnings for low-earners, 67 per cent for middle earners, and 50 per cent for high earners – were designed to help people smooth their incomes over their working lives and into retirement. It also added a minimum policy target of 45 per cent for median earners.

Two decades on, the report finds that the combination of the New State Pension and auto-enrolment means that workers can expect to reach the minimum policy target, and that fully auto-enrolled low-earners are on track to hit their target replacement rates upon retirement. On the other hand, middle and high earners are some way off track.

However, this does not necessarily mean that all middle and higher earning workers will face an income shortfall in retirement. The report notes that many of these workers are able to use other financial assets to supplement their savings. Indeed, a typical middle earner in their late 50s currently has enough disposable wealth, alongside their pension savings, to secure an adequate income in retirement (though people without wider financial assets remain at risk).

Furthermore, the Foundation says that while low-earners may be on track to hit their target replacement rates upon retirement, they face other savings challenges during their working lives. For example, one-in-three working age adults live in families who have accessible savings of less than £1,000.

Together, the Foundation says this means that while the one-size-fits-all approach has worked well for the first chapter of auto-enrolment, the next chapter will require both a boost to saving rates and a more flexible approach, in order to reflect the different challenges that low, middle and higher earners face.

The report says that default contribution rates into auto-enrolment should continue to rise over the next decade, initially from 8 to 10 per cent. However, the additional funds from this next phase of rising contribution rates should go into an easy-access sidecar savings account, with any balance over £1,000 then flowing into an employee’s pension.

This saving boost, combined with added flexibility, would help low earners balance building up their rainy-day savings while maintaining their current rate of pension saving. It would also help higher earners, who are more likely to already have rainy day savings, to further boost their pension pots.

The report adds that if the Government still wants to get middle and higher earners closer to their target replacement rates upon retirement, and wants to raise contribution rates ever further, it should consider doing so for higher earners only, or during middle and late working age.

The Foundation says that the success of auto-enrolment so far has laid the groundwork for delivering better living standards in later life. The Pensions Review should build on that success, but also tweak it, to complete the job of helping to solve Britain’s longstanding problem of workers not saving enough, however much they earn.

Molly Broome, Economist at the Resolution Foundation, said:

“Twenty years ago, and amid widespread concerns about poverty in later life, the Pensions Commission set benchmarks for how much people would need to save during their working lives to enjoy a decent income in retirement.

“Policies like the New State Pension and auto-enrolment have delivered on their objective of giving everyone a decent minimum level of retirement income. But the job is incomplete. And so the new Government’s Pensions Review, which could set policy for the next decade, should focus on tackling the different savings challenges that low, middle and higher earners face.

“As well as continuing to boost pension saving, auto-enrolment also needs to be more flexible. It should allow low earners to build up rainy day savings that they can draw on before retirement, while higher contributions for higher earners could help them get closer to maintaining their level of living standards into retirement.”

Patrick Heath-Lay, Chief Executive of People’s Partnership, provider of The People’s Pension, said:

“The next phase of the Government’s Pensions Review should decide what pensions policy is trying to achieve before it looks at the case for increasing statutory minimum pension contributions. As this report shows, there are compelling reasons to accelerate reform as the government’s own figures show four-in-ten people are under-saving but, it’s essential that there are clear objectives for the pensions system. It’s impossible to answer questions about whether legal minimum contributions are at the right level without first discussing what level of retirement income pension policy should actually target.

“For millions, the combination of legal minimum pension contributions and the state pension will totally determine their quality of life in retirement. Any conversation about the future of pensions saving needs to start with the question ‘how much is enough?’”  

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Download the full ‘Perfectly Adequate’ research report

Download the full ‘Perfectly Adequate’ research report

Parents of disabled children could be £138,000 worse off in retirement

Parents of disabled children could have £138,000[1] less in their pensions if their caring responsibilities prevent them from returning to work, according to analysis from leading workplace pension provider, People’s Partnership[2].

The provider of The People’s Pension to 6.7 million people across the UK calculated the impact of caring for a child with a disability on parents’ ability to save for retirement. It found parents of disabled children who return to work part-time are £89,000[3] worse off than parents who are able to continue working, while those who take a career break to care for a disabled child and receive a pay cut when they return are £55,000[4] worse off in retirement compared to a normal working parent.

Meanwhile, further research from the not-for-profit company found that just under two thirds (64%) of parents of disabled children are worried about their future finances, according to new research from People’s Partnership[5].

In a survey of more than 2,000 adults, it found more than a quarter (27%) of parents in the UK have at least one child with a long-term health condition, impairment or illness – impacting millions of families across the UK.

For those parents:
• Over half 53% of non-retired parents are not confident that they’ll have enough pension savings to live the lifestyle they want in retirement.
• Just one in ten (11%) parents of disabled children feel adequately supported by the Government or charities in caring for their children.

While the Carers’ Leave Act, which was became law in April, introduced five days unpaid carers’ leave, People’s Partnership is calling on employers to create the flexibility and workplace culture that allows parents to balance caring and working. It is also calling on the pensions industry to implement better access to financial planning resources and more robust support systems to help close the pension gap for parents with disabled children.

People’s Partnership has a Financial Wellbeing Hub[6] , which includes information for carers and works with a specialist organisation to help people, including carers, get back into work after a period of time away. It is calling on employers to implement flexible working policies, internal support groups and leave policies that are similar to maternity and paternity policies, but for parents of disabled children, to better support carers in their careers.
Nicola Sinclair, Head of Responsible Business at People’s Partnership, said:

“There is a dire need for more comprehensive support structures for parents caring for children with long-term health conditions. Better access to financial planning resources and robust support systems would help relieve some pressure on this forgotten group of people, but further action is needed if we are to avoid another pension gap widening further.

“While flexible working policies offer some relief, tailored support, rather than box ticking, is crucial for long-term financial security and improved retirement outcomes. It’s vital that employers who don’t follow the new flexible working laws are held accountable. We need to develop resources tailored to these employees who care for a disabled child, with a focus on combating stigma and creating more inclusive workplaces that allow them to remain in and return to employment. Our research shows that some parents of disabled children are facing poverty in retirement unless things change dramatically.”

Richard Kramer, Chief Executive of the national disability charity, Sense, said:

“The research highlights the stark reality for parents of disabled children, who face significant financial hardships due to their caregiving responsibilities.

“At Sense, we see firsthand the challenges these families face. Very few parents, who are struggling day to day, will have the luxury of thinking about retirement. So, it is little surprise that they’re at such a disadvantage when it comes to saving.

“Local and national government must commit long-term resource and funding to support families. And employers must do their bit too – creating more supportive environments with improved flexible working policies.

“We need to show that we value these incredible individuals in our communities.”

People’s Partnership undertook additional qualitative research and, through interviews with parents of children with disabilities, who were able to work, it found that reduced earnings through lack of career progression, having to take a lower paid part-time job, and often only having one household income; significantly hampered parent’s ability to save for their retirement[7]. However, often this is not the case, and parents are unable to return to work due to the demand of care.

The link to the report, which was commissioned and overseen by Fern Healey, Executive Business Partner at People’s Partnership, as part of her sponsored Master of Business (MBA) development. The report can be found here: Pension inequality – parents of disabled children | People’s Partnership (peoplespartnership.co.uk)[8]

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CASE STUDY
Maria Cook, aged 47, from Crawley, has a 15-year-old son Ryan, who is profoundly Autistic. Maria has been his full-time carer since birth, meaning she has been unable to return to work. Prior to having Ryan, Maria previously worked at Gatwick Airport as a Contract Manager for ICTS UK Ltd and then as a Duty Manager for G4S, from who she received a pension.

She said: “I grew up in a household where from a young age my father drummed it into me how crucial it was to save into your pension to set you up for retirement. With the amount of hours Ryan requires care, the Carers Allowance received from the DWP works out to something like 48p an hour, which has meant I haven’t been able to pay into my pension. Having a child that needs support for the rest of their life, combined with rising living costs and skyrocketing mortgage payments has meant my previous hope of a comfortable retirement will remain a distant dream.”

While some parents with disabled children find part-time or Carers Leave measures helpful, these measures are still unpaid. Maria thinks employers need to be doing more to help parents with disabled children.

She says: “A lot of employers, unless carers themselves, don’t understand the challenges carers face on a daily basis. Even parents who have support from their employers still struggle as there’s still so much stigma around being a carer. I think employers could be doing a lot more to better support carers, for both financial and emotional wellbeing.”

One in five savers have never checked their pensions, research by The People’s Pension reveals

Nearly a fifth of savers (19 per cent) have never reviewed how much is in their pension savings, new research from the leading workplace pension provider People’s Partnership has revealed.

A survey from the provider of The People’s Pension, conducted by YouGov, also found that two in 10 (21 per cent) savers check their pension just once a year while a fifth (19 per cent) check their retirement savings once a month or more often.

The research also found:

  • Nearly a third (32 per cent) of people don’t know how much they have saved in all of their pension pots.
  • Only one in 10 pension savers had an app for their pension, compared to 9 in 10 people (91 per cent) who use one for banking, around six in 10 (58 per cent) who use an app to order food to be delivered and more than four in 10 (43 per cent) who check their investments on an app.
  • More than six in 10 people (64 per cent would check their savings more often if they had a mobile app for their pension.

David Meliveo, Chief Commercial Officer at People’s Partnership, said:

“At a time when most people aren’t saving enough for retirement, it’s worrying that the vast majority of savers have never checked their pensions – leaving them with no idea how much they’ve saved, or maybe even where it’s saved.

“For most people it’s now an everyday habit to use apps for shopping, banking, or even investing, but when so few pension savers check their savings that way, it’s clear that the industry could do much more to engage their members and help them plan for their future. 

“Through initiatives like our new app and retirement planner, we aim to make it easier for workers to keep track of their savings and help them to make the right financial decisions for their future selves.”

The People’s Pension app allows its 6.7 million members to check how much they have in their account, how the scheme is investing their money, and aims to help them plan financially for their future. The app will be regularly updated to include new features, which will soon include the newly launched Member Rewards, which are special offers and deals available only to members of The People’s Pension.

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Savers face being more than £70,000 worse off in retirement due to poor pension transfer decisions

People could be left more than £70,000 poorer in retirement because they don’t understand charges when transferring their pension, according to new research1 from People’s Partnership2, which provides The People’s Pension to more than 6.5 million people across the UK.

Nearly three quarters of people who had recently transferred their pension (72%) didn’t know exactly what the fees for their old pensions were or what they were being charged for their new one. While on in 10 (11%) didn’t think their new pension had any fees or charges.

Analysis3 shows that for a 30-year-old earning £30,000, moving a £10,000 pension pot from a provider charging 0.4% to one charging 0.75%, would leave them £32,894 worse off when they retired at 67. If they moved a £50,000 pot, they would have £59,523 less to live on in retirement. And if the same person is earning £45,000 and moves a £50,000 pension, they will be £72,689 worse off in retirement. The calculations assume ongoing contributions of 8% and wage inflation of 3.5% with investment returns of 5%.

People’s Partnership believes the pension industry needs to be more transparent and should help savers understand key information when transferring their pension, to prevent them from making detrimental financial decisions for their future.

Commenting, Patrick Heath-Lay, Chief Executive Officer at People’s Partnership, said:

“While there are many factors that can make a pension attractive, the two fundamental aspects are investment returns and charges. Unfortunately, very few people know exactly what they are being charged for their pensions and they are being let down by an industry that doesn’t make this information easy to find or understand. If people can’t make an informed decision about the value they are being offered by different providers, they risk losing thousands of pounds from their retirement pots. This lack of transparency is an enormous issue that pensions providers have to address.

“Our research shows the real-world impact of small differences in percentages are incredibly hard to grasp, so the onus is on the pension industry to make sure consumers understand what they are being charged. We are taking direct action to provide our members with more guidance through the transfer process and are creating tools that will support them to make informed decisions that are in their best interests. We passionately believe that there must be an obligation on pension providers to give clearer information to those savers who are considering transferring and the industry must move to provide comparable consumer focused value metrics. ”

People’s Partnership found that only half (50%) of respondents said it was easy to find information on fees and charges from both their old and new pension providers. The research suggests fees aren’t anywhere near as important a consideration as they should be when transferring a pension, and that people don’t appreciate how seemingly small differences in costs can lead to significant differences in real terms.

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CASE STUDY

Rymyni Adams-Taylor, aged 29, from Birmingham, saw an advert pop up on Facebook promoting a simple app to bring all her pensions together. She moved two old pensions into the pension consolidator, still paying into her existing workplace pension.

She did not do any research for two reasons. First, she was not aware that she could consolidate into her existing pensions. She feels that this is not well-known amongst people of her age. Secondly, she feels that all pension companies are the same.

“To be honest, it wasn’t something that I’d done any research into. I wasn’t aware that there was more around. But I can’t see what another provider is going to provide that’s going to be a better deal because they’re all basically offering the same thing.”

She had no idea that costs could vary and felt disappointed this was not pointed out to her as part of the process.

“I don’t feel like they gave me that information. Especially for someone like myself, I don’t have experience in dealing with this. I didn’t go to any type of advisor for advice or what the best option was. They sort of enticed me in on the basis that it was easy to navigate and it’s a simple system to use.”

She tried to find her cost on the app and felt that it wasn’t very obvious to find.

“You had to click into a few different things. It wasn’t just on your homepage. I think I clicked four times before I found it.”




Retirees still caught off guard by inflation impact – early findings of unique longitudinal study reveal

Almost a decade after the introduction of Pensions Freedoms1, new research has revealed that retirees still aren’t considering the impact that inflation has on their pension savings.

Leading workplace pension provider People’s Partnership2 and asset manager State Street Global Advisors3 have today release early findings of New Choices, Big Decisions study, The research reveals that despite having experienced the pressures of rising cost of living, people who retired years ago still don’t factor in inflation when accessing their defined contribution pensions, meaning their savings might not go as far they had anticipated.

The latest instalment of the longitudinal study, which has followed the journey of a group of older savers up to and into their retirement since 2015, recommends that stress testing planning tools offered by financial service providers should provide a greater focus on inflation protection. It also says that pension providers should look to strengthen the information they provide on inflation in their customer information and education resources.

The report, which is due to be published in full early next year, highlights concern about the lack of attention given to the 1.1 million4 pension pots already in drawdown. It highlights that certain savers may receive inadequate communication about whether their previously made investment choices are still appropriate today, taking into account changing economic conditions.

The publication of the report coincides with the launch by People’s Partnership, which provides The People’s Pension to 6.5 million savers of a new online retirement planner5 which will enable its members to work out how much money they may need and could have in future.

Phil Brown, director of policy at People’s Partnership, said: “This unique study shows that people don’t necessarily make the right choice and, without support, they tend to develop an inflation “blind spot” in their retirement planning. We mustn’t forget that the recently retired vividly remember interest rates at 15% and above in the 1970s and early ’80s, yet many still don’t factor in inflation when planning their finances. This vital research underlines the need for savers to have access to retirement planning tools and products which factor in inflation and highlight the risks that poses to savings. There is a real danger that some retirees will have less in their pockets over the longer term than they had first anticipated,

“These findings are further evidence that the average saver, especially those in their sixties and seventies, require more support when it comes to accessing their retirement pots, especially those who entered into drawdown before the economy experienced its current challenges.”

Alistair Byrne, head of retirement strategy at State Street, added:

“Our research underlines the challenges individuals face when making decisions about how to access their pension pots. It’s clear they need more support from the industry, and access to well-designed solutions that deliver a balance of flexibility in early retirement and life-long income in later life.”

CASE STUDY

Retired London cab driver Laurence Collier, 74, from North London is one of the 50 savers to have taken part in New Choices, Big Decisions. Although he has four pensions and describes himself as comfortable in retirement, he admits he regrets not seeking professional advice at the time.

He says: “Probably one of the biggest mistakes I made was not building in protections against inflation in when I decided how to take most of my pensions – I only have one where I haven’t been affected by inflation. I didn’t think it through, and I wish I had taken proper advice as I didn’t go to a financial adviser.

“Although I’m in a good financial position, it would have been nice to have been better protected against inflation – that would’ve been the cherry on the cake.”

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Plans to improve retirement options for savers welcomed

Plans to improve retirement product options for savers have been described as sensible by People’s Partnership1, which provides The People’s Pension to more than six million people across the UK,

Commenting on Government proposals to improve access to decumulation products for Defined Contribution savers2, Phil Brown, director of policy at the provider of the UK’s largest master trust

Speaking after the deadline for the consultation closed, he said: “As the typical automatic enrolment saver gets older, we think it’s crucial that the decumulation options for these workers are significantly improved.

“Although more details are required, there are real potential benefits from the proposed reforms from the Department for Work and Pensions. At face value, the evidence suggests that a strong steer towards a suitable product may improve decision making for a significant proportion of defined contribution pension savers.

“We see a framework in which people are free to take money from their defined contribution pension savings via a good quality product as a sensible plan. Automatic enrolment has been a tremendous success over the past decade, but it’s vital that these 11 million savers are able to easily access their savings when they need to.”

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Making decumulation simple, straightforward, and clear for all

Every year, around 600,000 pensions are accessed for the first time. These new retirees begin the complex process of decumulation – getting rid of the assets they’ve built up in their pension pots to maintain their standard of living. But surprisingly, before selecting how to withdraw their pension, less than half of retirees seek professional advice.[i]

The cost of advice isn’t the only issue

ABI research found that 72% of customers would not pay for financial advice for various reasons. The first and most significant issue is the cost of regular advice and the absence of other choices. According to ABI polls, nearly half of those surveyed (46%)[ii] prefer one-off advice if it were easily available, while just 12% prefer continuous advice.

However, money is not the only concern. Pension Wise offers free guidance, but data suggests that just 14%[iii] to 22%[iv] of those retiring use it before accessing their money.

Participants in our five-year longitudinal study, ‘New Choices, Big Decisions’, told Ignition House researchers that retirement had become ‘scary’ to contemplate. They don’t seek advice because they believe pensions are too complicated for them to grasp, or because they are naturally concerned about the sustainability of their investments.

The pitfalls of no advice

More than half (53%) of individuals who accessed their pension savings in the previous 5 years claimed their 25% tax-free lump amount.[ii] According to our findings, individuals are making these and similar decisions without considering the implications. Participants told us that taking the cash was the easy decision because it was tax-free, that they considered the lump sum as a mid-life “bonus,” or that they “simply didn’t think too much about it.” 

Many people didn’t see their option as a retirement income decision, and many are unaware of the consequences of decumulating into cash. They may be unaware of the possible effect on their long-term earnings.

Shifting from automatic to manual

During the accumulation stage, the majority will be invested in a scheme default fund or glidepath, so they don’t have to think too hard about it.

In comparison, once they reach retirement, people have the more difficult task of converting a pot of cash into an income. Our research shows that many people make pension decisions without adequate thinking or comprehension and without advice.

We trust individuals to be risk managers, actuaries, and investment gurus, and you’ll probably need to be a little bit of everything to produce a decent outcome. We, as an industry, place unrealistic expectations on individuals to make complex decisions for themselves.

FCA solutions fail to address all the issues

The Financial Conduct Authority’s (FCA’s) recent retirement outcomes review provided a thorough examination of the issues that people confront when collecting a retirement income, but the remedies presented did not adequately address the issues raised.

Consider investment pathways. They can help individuals from mistakenly decumulating into cash when they use flexi-access drawdown. However, they don’t address the other significant risks. These include:

  • Withdrawing too quickly and running out of money
  • or withdrawing too slowly and not enjoying the retirement they had planned.

Pathways, therefore, aren’t a sound strategy for decumulation in occupational pensions.

Customisable, simple, and easy to compare

Most individuals want pensions that don’t require them to have financial skills to work successfully. Affordable, clear decumulation products that keep people invested for growth in their early retirement years while providing greater assurance as time passes. These pensions must be customisable while being simple to maintain on their own and easy to compare with other pensions available.

The government’s strategy to increase the number of pension savers has proved enormously effective. The industry’s focus must now be on providing pensions and services that assist people in achieving the sustainable retirement they deserve. Positive pension outcomes should not be limited to those who can afford guidance; they should be accessible to everyone.

[i] https://peoplespartnership.co.uk/downloads/supporting-customer-decisions-about-pension-withdrawals/

[ii] https://peoplespartnership.co.uk/downloads/supporting-customer-decisions-about-pension-withdrawals/

[iii] https://peoplespartnership.co.uk/downloads/supporting-customer-decisions-about-pension-withdrawals/

[iv] https://peoplespartnership.co.uk/downloads/supporting-customer-decisions-about-pension-withdrawals/

[ii] https://peoplespartnership.co.uk/downloads/supporting-customer-decisions-about-pension-withdrawals/

information

This article was written when we were B&CE, before we changed our name to People’s Partnership in November 2022.