How can industry improve the retirement transition for members? 

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Defined contribution trustees are inadvertently defaulting members into retail journeys, where they risk losing up to 80% of their annual retirement income due to poor value, the chief executive of HSBC Retirement Services has said. Others want to see the ‘shackles taken off’ master trust Nest to spark innovation in the retirement space as a first mover. 
Trustees are not considering value for members in the retirement transition sufficiently, Alison Hatcher, CEO of HSBC Retirement, has said, even though they should do so under regulation. 
"Value for members is in existence and therefore under regulations we should be looking at the value of transition. If we know that through the transition, we need to look at the services being provided - is there good value, what are the investment choices and what are the communications - then we have a framework that we’re not currently potentially using to its maximum potential,” she said speaking at the Hymans Robertson Future of Retirement Conference on Thursday. 
“By not doing that, what we are doing is defaulting individuals into a retail journey. By doing nothing, we are actually dictating a journey they will take,” said Hatcher. Even where funds offer a panel of financial advisers, this will typically result in members moving into a retail environment. 
Recent research by HSBC shows that the transition into the retail environment can be detrimental for members to the point of 80% of one year’s income from their retirement.  
“Once you’ve spent so much time and effort accumulating, you want to preserve that value going into retirement,” said Hatcher. 
Instead of pushing members into retail offerings, “we could just put a master trust at the end of every single trust scheme”, she suggested. “It would cost nothing, you’d protect individuals and make sure that risk wasn’t there - that risk of the transition issues, the risk they probably will get bad advice or none and end up in a poor solution.” 
Master trusts “are bending over backwards to make sure we can integrate into the back end of trust options, we are trying to preserve those journeys and we are trying to make sure it’s as frictionless as we can”, she said, but added the key was in giving flexibility. 

“This is a period where the individual doesn’t really know what they want. We are putting them into an option that probably will be wrong, detracting value again,” she said. “You want to handhold them but give them flexibility within a solid framework they can trust.” 
Not everyone agrees that trustees are ignoring value when it comes to the retirement transition. Speaking at the same event, professional trustee Mark Cliff from 20-20 Trustees, who sits on the Legal & General Master Trust board, said what schemes provide varies widely. 
"Thinking about L&G... I've never once been in a meeting where I thought our fiduciary duty ever ends in that context,” he said. 
Cliff agreed more needed to be done to improve the retirement transition. “Investment pathways is a start,” he said but “does feel like just the start”.  
He agreed that most people do not know what they want when they get to retirement. However, “this is the kind of area that master trusts and large providers are really thinking about, because it is an issue”, he added. 
Innovation needs a first mover, argued Darren Philp, founder of Shula PR and Policy, and suggested that master trust Nest should be allowed to take on this role. 
“You can have regulatory drivers, you can put duties on trustees, you can make it part of the auto-enrolment criteria. But sitting on a shelf somewhere down in Canary Wharf at Nest is a blueprint, their retirement blueprint,” he said. 
Nest developed a blueprint for a retirement income strategy after the pension freedoms were launched in 2015. The blueprint followed a consultation which gathered evidence from around the world on the needs of defined contribution savers. 
“There was discussion about whether it was the right time... but I think that when government [takes] the shackles off Nest for this blueprint, that will get the providers sitting up, thinking, ‘Okay, we’re now going to have to innovate and invest in this space’, because you have a large market player there that if they don’t do it, will swallow up this market,” he said. “That could be a huge driver of change and [should happen] probably sooner rather than later.” 

How can value and flexibility for members be improved in the retirement transition?

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