The Pensions and Lifetime Savings Association (PLSA) has launched a call for evidence on a proposal for a solution designed to support savers navigating pension freedoms as they move towards retirement.
The solution sets out to protect people who don't engage with, or fully understand, the financial choices they face when they move towards semi or full retirement.
Research by the trade body revealed 71% of savers in defined contribution (DC) funds want support when deciding how to access their pension, including some wanting guidance from their pension scheme to help them move to a ready-made retirement income option.
The consultation, published yesterday (28 July), seeks views on proposals to establish a new regulatory regime that will require pension schemes to support their members when making decisions about how to access their pensions including by signposting to products that meet minimum quality standards.
Since 2015, pension freedoms have given savers greater choice about how to access their saving pots, however the PLSA revealed there is significant evidence showing "the confusing range of options is potentially leading to poor decision-making and poorer retirements".
It said: "Too often the complexity results in people ‘choosing not to choose' or taking a decision that may not be in their best interests. This can have significant negative consequences for their retirement living standard."
The PLSA's research - which questioned 2,000 pension savers and retirees about their current and future plans for accessing their pensions - also revealed while a majority of savers with DC pensions who were yet to retire said they knew they would have to make a choice as to how to take their money, just 28% had a clear plan about how they would do so, while 30% did not know about or understand their options.
Head of DC, master trusts and lifetime savings Lizzy Holliday said: "Five years on from the introduction of the pension freedoms, it is clear that too many savers are struggling to understand the complex array of options they face at retirement and are at risk of falling victim to making decisions that hurt their retirement living standard.
"Pension schemes want to support savers more effectively than at present by improving the help they get when they are thinking about drawing their pension and setting a path that protects them from poor outcomes. But many are looking for the support of a clear framework.
"Our proposals seek to provide support to savers to make better decisions and give clarity to schemes about their obligations towards savers at this stage of their retirement savings journey. We look forward to hearing the views of everyone with an interest in ensuring more people achieve a better income in retirement."
The call for evidence closes on 4 September, with the trade body expected to publish the results in October.
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