Pensions guidance needed for savers close to retirement…
The Pensions Policy Institute (PPI) has published a report examining how defined contribution (DC) savers approaching retirement prefer to draw income from their DC funds. The key conclusions of this research include:
- Whilst savers generally welcome the Budget freedoms, they quickly become disengaged when faced with the choices and trade-offs involved in accessing DC funds under the new regime
- Savers are often unable or unwilling to plan beyond the next few years, making locking into long-term courses or action difficult. There is also generally a lack of understanding of spending needs in retirement and likely life expectancy
- Although savers lack trust in pension products and prefer investments outside of pensions, they prefer the default investment options provided in pension products or choose to invest with providers with default options
This report is the first part of a two-stage research project. The second part aims to explore the communication challenges around comparing different options at retirement.
Comment
This report shows the multitude of challenges in breaking down the barrier of disengagement from savers to help them make the right choices with their savings at retirement and beyond. Although this report is directed at the DC market, trustees and employers of defined benefit schemes should also bear in mind the confusion often felt by members close to retirement, especially if they are considering transferring their benefits out of the schemes to access the DC options.
… and pensions education needed for teenagers even before they start work
As workers from the age of 22 are enrolled into a workplace pension scheme through auto-enrolment, the Government is planning to produce new teaching materials to help get information about financial planning into the classroom and boost saving for later life.
Comment
An all-rounded financial education which includes pensions in later life will very likely help to ease the low pension income many workers now face when they retire. How the lessons will pan out, given the current tension over retirement income amongst teachers, remains to be seen.
An essential guide to the Regulatory approach to publishing case-specific information
In response to its having published an increasing number of “Section 89” case reports in recent times, the Pensions Regulator has published an essential guide to its approach to publishing information on its regulatory and enforcement decisions.
It highlights that a case will only be considered for publication if it is of public interest, and fulfils one or more of its aims to be transparent in how and when it uses its powers, to educate and provide guidance, and to deter unlawful or improper practices or behaviours. The Regulator will also take into account any negative impacts, such as whether there would be adverse impact on market behaviours or prejudice to investigations.
Auto-enrolment earnings parameters – draft Order published
The draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2015, which will give effect to the 2015/16 earnings parameters agreed in December (see Pensions Bulletin 2014/52), has been published.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
