The DWP’s Call for Evidence: Helping Savers Understand their Pension Choices closes today 25 July 2022. Phoenix Group is responding to this important call for evidence with three key points.
- Phoenix Group does not see inherent differences between the needs of those who save into contract or trust-based pensions, they have the same outcome in mind: the ability to understand the options available to them so they can make informed decisions about their future financial security. Many people will have several jobs throughout their working lives, so it is likely they will hold a mix of both types of schemes. As such Phoenix Group are broadly supportive of the expansion of the FCA’s Retirement Outcome Review to include trust-based arrangements.
- Phoenix Group’s response highlights the need for consistency in the regulations that determine the support that schemes need to provide to their members, encouraging the DWP to await the findings of the FCA’s current review into Investment Pathways before deciding on any new requirements to be placed on Trustees. This will help ensure decision-making is based on the most recent analysis and allows the FCA and DWP to work collaboratively to draft consistent rules.
- While Pension Freedoms has created a more complex landscape for consumers as they move to and through retirement, it has also created opportunities for many members to achieve better outcomes than would have been available previously. As such, Phoenix Group believe the best way to help savers understand their pension options is to offer support tailored to their needs.
Andy Curran, Chief Executive Savings & Retirement at Phoenix Group and CEO of Standard Life, said:
“Pension Freedoms challenged our industry to provide innovative solutions to meet the needs of our customers, and we responded: now we must work to deliver on the call Phoenix Group made earlier this year to help customers understand, and make effective use of, the options available. Providing generic information is not enough; we believe that real innovations in personalised guidance and financial advice are needed to close the Guidance Gap and help members to make informed decisions.
“Currently it is difficult for pension schemes to do that as there is a significant risk that steps taken to support customers in this way could be seen as providing financial advice. We would welcome policy changes that allow more flexibility for pension providers to help support customers to make choices for their retirement and we have been calling for a government-led review to look at how best to support consumers to manage their finances.”
Claire Altman, Managing Director of Individual Retirement at Standard Life, part of the Phoenix Group, commented:
“The pension freedoms changed the face of the decumulation journey for the pensions industry and its members. Overnight, a huge new range of options opened up to people and this choice has been well received. It has however introduced a great deal of potential complexity regarding the choices people have open to them, exacerbated by the well-known guidance and advice gaps.
“When it comes to the current decumulation market, careful consideration needs to be given to the way in which savers are currently interpreting their income choices. We have moved from a world where the vast majority of people took an annuity to one where most opt for drawdown, or cash withdrawals in the case of smaller pots. However, both options come with drawbacks as well as benefits.
“The current decision-making process has been baked into contract based pensions with the introduction of investment pathways. While we see many benefits to pathways, we believe they overlook the complexity of financial planning in retirement. We would like to see them accommodate the need for income certainty and requirement for flexibility e.g. to give the opportunity to target drawdown early on in retirement before buying an annuity with some or all of their savings at a later date.”