TPR calls for a ‘sat-nav’ for retirement which simplifies options and empowers savers to make informed choices
Pension savers need more help in retirement choices research from the Pensions Policy Institute (PPI) finds.
The report - Assessing the UK Retirement Income Market; a report sponsored by The Pensions Regulator (TPR) – found most defined contribution (DC) savers (70%) currently fully withdraw their savings without consulting professional advice or tailored guidance.
It found half (51%) of the more than 450,000 pots accessed for the first time between October 2023 and March 2024 were fully withdrawn as cash.
The research warned that taking full cash withdrawals or staying in investment strategies designed for pre-retirement, not post-retirement, needs may not be the best options for individuals to meet their long-term retirement goals.
TPR said it wanted the PPI's findings to spark a conversation, particularly as DC pots will continue to grow, on how industry can support better saver outcomes and develop a consensus on the challenges to delivering value post-retirement and called for a ‘sat-nav' for retirement.
TPR interim director of policy and public affairs Patrick Coyne said: "Auto-enrolment built a nation of savers. Now we must move from a savings system to a pensions system, and that requires a ‘sat-nav' for retirement which simplifies options and empowers savers to make informed choices.
"Without the right support, savers may find themselves forced to work for longer or find themselves strapped for cash when they should be enjoying older life."
Coyne added: "Plans for a guided retirement duty in the Pension Schemes Bill present a fantastic opportunity for industry and policymakers to provide products and services suitable for different kinds of savers. We are keen to help and that is why next month we are also launching an innovation design service to get new ideas off the ground."
TPR also said it wanted greater transparency over post-retirement investment strategies and for schemes to make better and more systematic use of the data they have to better understand their savers' characteristics and circumstances.
It said this would help trustees to know how best to support their savers to navigate decisions at retirement, including through more tailored communications and targeted nudges.
PPI senior policy researcher Maríana Garcia Requejo also commented on the research, saying it marked an "important first step" in defining what value might look like in decumulation.
She said: "It plays a role in mapping savers' needs and behaviours. The development of a more comprehensive evidence base is highlighted as both a challenge and an opportunity. Setting the direction for what data is relevant for the market to collect could guide us to the evidence needed to improve saver outcomes."
"As DC pensions become the primary source of private retirement income, itis increasingly important that savers are supported to make sustainable choices. This report sets the stage for the second in the series, due later this year, which will explore future opportunities to design a more effective retirement income market that can provide value for money for all savers."
The PPI research is based on a review of existing literature, stakeholder interviews, and available data on the DC landscape, including figures from the Department for Work and Pensions, Financial Conduct Authority and the Institute of Fiscal Studies.
