Two-fifths of DC schemes offer no decumulation products
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More than two-fifths of defined contribution schemes offer no decumulation products ahead of an incoming duty on trustees to offer guided retirement, new analysis by the Pensions Regulator has found. TPR is urging smaller schemes to act or consolidate.
Although drawdown is offered by only 16% of schemes, 13.4m members – representing 43% – have access to it as larger schemes are on the front foot when it comes to decumulation, the first such analysis by TPR suggests.
The regulator said the shift towards drawdown being offered in-scheme is largely driven by the growth of master trusts, which have the scale and governance to provide this.
“These findings herald a transformation in the DC workplace pensions landscape ahead of guided retirement duty, with millions of savers now able to access in-scheme retirement options. This is just the start, however,” said director of policy Joey Patel.
“Too many members in smaller schemes are left without support when they reach retirement. This is not good enough,” she added.
Patel urged trustees to start getting ready for the pension schemes bill by reviewing their offer and starting to design their decumulation products.
“If you are not able to guide savers into the right retirement options for them, our message is clear: you should consider consolidation into a scheme that can offer value for money solutions,” Patel said.
TPR found that the majority (86%) of the largest schemes, those with 5,000 or more members, offer at least one retirement income option, while just 46% of small schemes offer members any decumulation product and two-fifths of all schemes none at all.
Only a quarter (24%) of DC schemes currently offer at least one regular income in-scheme product. More than half (53%) of all members, 16.4m, are in schemes offering at least one of these products.
The most widely offered product by schemes is uncrystallised funds pension lump sum, as 43% of schemes offer this, covering 98% of all members. Larger schemes are more likely to offer UFPLS.
The most widely offered product by schemes is uncrystallised funds pension lump sum, as 43% of schemes offer this, covering 98% of all members. Larger schemes are more likely to offer UFPLS.
Other frequently offered decumulation products include lifetime annuities facilitated by a trustee (21% of schemes, representing only 1% of members), annuity facilitation (20% of schemes, representing 9% of members), partial encashment (17% of schemes, representing 9% of members) and drawdown (16% of schemes, representing 43% of members).
