Lee Hollingworth, Head of DC Consulting at Hymans Robertson, comments on today’s publication of the joint report by the National Association of Pension Funds and the Pensions Institute at Cass Business School on the challenges DC members face at retirement:
“We agree with the conclusions of the report and call for more support to be given to members in both trust- and contact-based schemes who will buy an annuity. This should form a central part of a scheme’s overall governance plan.
"We would go further and suggest that support needs to be given to members on a wider range of retirement options, including flexible income drawdown. With annuity rates at historically low levels, many members may find themselves better off by opting for the more flexible income drawdown route, depending on their individual circumstances.
“Recent legislation changes mean that flexible income drawdowns are now open to many more pension members. Currently, many scheme brochures only highlight annuity purchase – we believe this opens the fiduciary up to accusations of not making members aware of all their retirement options and could lead to trustees being held responsible where members make an inappropriate decision."
The report also calls for support for members once they retire. Hollingworth continues, "We also believe that members need effective communication before they enter any form of de-risking phase. Otherwise, we may find members sleepwalking into buying an annuity when other more attractive options may be more suitable”.
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