Nest looks set to deliver a wider range of decumulaton options for members after receiving government and industry backing for this course of action.
This follows a DWP call for evidence on ‘Helping savers understand their pension choices’ which focused on options at retirement.
In its response published today, the government signalled it will relax current restrictions on Nest. Its is also proposing to expand collective defined contribution (CDC), to ensure this is a more widely available retirement option for members.
The government is inviting consultation on the details of these proposals.
The DWP said says that as the largest AE provider Nest should offer the same decumulation choices as other DC provider to ensure good member outcomes.
The DWP said the feedback it received suggests that the pensions industry is generally supportive of this approach , provided it is financed without additional subsidy.
The DWP said it wants to improve at-retirement options for members across the board. It the document published today it says that there are a number of ways schemes currently support their members when it comes to making the post of their pension pots. These include:
• directly offering a suite of products and services;
• partnering with other organisations to offer a similar range of products and services;
• organising advice sessions; and
• signposting to appropriate guidance services
The DWP commented that this range of options was “unfortunately, not universal”. It adds: “Our aim, through the proposals presented in this consultation, is to establish a broad alignment in the service offered among different providers where every pension scheme, either directly or through a partnering arrangement, provide decumulation solutions for their members.”
The DWP adds: “We are however not looking for precise consistency across schemes as we recognise and believe schemes should adapt the offer based on their membership.”
It adds that it would like to see CDC included within this list of decumulation options where appropriate.
“We know a large proportion of people would like to receive an income in retirement from their pension, with around 2-in-5 stating they plan to take an annuity (and this is even higher for those with no clear plans for accessing). However, very few people, around 10 per cent, currently buy an annuity. Members are also dependent on their provider to offer decumulation products or having to shop around for the best deal; around one-third of drawdown/annuities being bought from a new provider. CDCs may offer a more appropriate savings vehicle for pension savers.”
Nest welcomed these latest proposals, with the company’s director of strategy and corporate affairs Zoe Alexander saying: “These DWP publications set out a clear and coherent direction of travel for the sector, and we believe the Government’s focus on driving scale and consolidation is right. Members expect their schemes to offer value for money and simple ways to access their money as they retire. These proposals will help ensure they get that.
“It is particularly pleasing that both the Government and many of our industry peers recognise the need for Nest members to have access to a full decumulation solution on a par with members of other schemes. We look forward to working to deliver on this ambitious set of reforms.”
Laura Myers a partner at LCP and head of the firm’s DC practice adds: “Decumulation is rightly understood to be the most challenging issue in pensions, given the complex questions savers need to answer to achieve a sustainable income in retirement, and we welcome the Government’s continued focus on this area.
“What’s clear is that savers need more help to support their decisions about decumulation. We believe that “default” or “default-like” solutions have a role to play in helping savers get better outcomes, by taking the pressure off them to design their own post-retirement investment strategy and providing guide rails around the amount of income they should take.
“Solutions like this could include a whole range of options, including new options like decumulation-only CDC or an ability to flex you pension first and fix it later. However, we would like to see solutions evolve that reflect the DC environment as it is today, governance bodies already have significant scope to improve the post-retirement options on offer to savers, by working with providers to deliver tailored solutions that reduce member-borne costs and incorporate default mechanisms. The Government should support them to do so.”
TPT Retirement Solutions employer & strategic partnerships director Andy O’Regan says: “Employers, scheme members and the wider economy could all benefit from the introduction of CDC and we hope to see its increasing adoption in the coming years. We’re already speaking with employers who may potentially be interested in joining a CDC scheme.”
Pensions minister Laura Trott adds: “I am launching this consultation to set out our proposals for, and seek views, on a decumulation framework that will provide support at the point of access. In addition to the existing choices available to members under the pension freedoms, this could include an offer of a Collective Defined Contribution (CDC) arrangement in retirement.”
The post Nest to widen decumulation options as DWP looks to improve at-retirement options appeared first on Corporate Adviser.
