Pensions - Articles - Call for new regulatory framework to help savers

The Pensions and Lifetime Savings Association (PLSA) is calling for the establishment of a new regulatory framework to help savers with the complex decisions they face when choosing how to access their pension at retirement.

 The recommendation is being made following a three month consultation which set out the PLSA’s vision for a new Defined Contribution (DC) Decumulation framework in July. Having received widespread support, the final framework published today remains broadly unchanged, though some of the detail has been enhanced, refined, clarified and added to.

 Importantly, the PLSA believes there needs to be a statutory requirement on pension schemes to support their members when they are making decisions about how to access their pension. The framework will also deliver a set of minimum standards for the saver communication and engagement journey as well as product design and governance.

 This new framework is designed to meet several key objectives:
 • To provide more support to savers who do not engage with their options - utilising the lessons from Automatic Enrolment and the Open Market Option – as well as supporting freedom and choice for those who do;
 • To facilitate and influence future product development with a view to managing the risks for savers as Defined Contribution (DC) pots grow and dependency on DC derived incomes increases;
 • To utilise the benefits of scale and mechanisms such as the trust-based fiduciary duty within Master Trusts and Trust-based schemes and the responsibilities of Independent Governance Committees (IGCs);
 • To support similar saver experiences across the market, whilst enabling innovation to flourish;
 • To mitigate or help manage some of the risks savers are facing; and
 • To mitigate some of the key risks schemes are facing – including litigation, financial and operational risks.

 This framework represents an evolution of the pension freedoms – enabling freedom and choice and providing the support savers need.

 Emma Douglas, Chair, PLSA Policy Board, said: “The pension freedoms radically revised the journey for savers when they reached retirement, bringing new opportunities, challenges and risks to savers and pension schemes.

 “The decumulation framework we are recommending today responds to the evolution of the pension system. It will provide vital support to savers and help bridge the gap between the inertia which makes automatic enrolment such a success, and the range of choices (which can be confusing) savers face when electing how to draw their pension at retirement.”

 Lizzy Holliday, Head of DC, Master Trusts and Lifetime Saving, PLSA, said: “We are extremely grateful for the quality of responses and engagement during the consultation period. The input and views have reflected the breadth of our membership, wider industry and consumer representatives. The clarity of focus on the saver has been prominent throughout.

 “Driven by our mission to help everyone achieve a better income in retirement, our recommended framework is designed to provide pension schemes with the certainty to better support savers with their at-retirement decisions and seeks to place savers at the heart of at-retirement policy and delivery.”

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