Pensions - Articles - Inappropriate choices at retirement an area of value leakage

The Department for Work and Pensions has launched a consultation to understand the barriers to further consolidation of the occupational trust-based Defined Contribution market in the UK, following the consultation: Improving outcomes for members of DC schemes in September 2020. Mark Futcher believes these consultations are evidence that the drive to consolidate continues but there must be room for own trust schemes to continue.

 Mark Futcher, Partner and Head of Dc at Barnett Waddingham, said; “It is clear from the consultation responses published and the new consultation launched that the drive to consolidate continues. Whilst we agree that there are many schemes in the market which do need to improve and create better value for members, we must also recognise that there are many schemes which offer great value to their members. Consolidation often means moving to a bundled, pre-packaged solution which usually means the members picking up the full cost for services they sometimes do not use. There must be room for own trust schemes to continue to operate.
 “The Australian market is cited a few times without recognition that this is a very different offering which is driven by member choice. Employees do not have choice in the UK at the moment – they are automatically enrolled by their employer and many take comfort that it is their employer who has selected what many believe to be a leading pension offering.
 “The Australian system also has significant issues in the ‘at retirement’ phase which they have not tackled. Members making inappropriate choices at retirement is an area of massive ‘value leakage’ – lets tackle this before things get too big!”

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