Ruari Grant is head of DC and master trusts at the Pensions and Lifetime Savings Association
The latest of the Pension and Lifetime Savings Association’s (PLSA’s) regular columns looks at retirement income choices.
Ten years ago, pension freedoms gave savers greater flexibility in how they access their retirement savings than ever before. People over 55 were no longer required to turn their pension pot into a guaranteed income for life, giving them the option to draw down, take cash, or blend options as they saw fit.
As we all know, this increased flexibility meant increased responsibility and, for most people, decisions are made without financial advice. For many savers, particularly those who reached retirement through automatic enrolment, this represented the most complex financial decision of their lives. Most are not equipped to weigh up longevity, inflation, investment, and tax risks unaided.
Before 2015, the system did the first three of these for them. Now, far too many are left to navigate a complex retirement market with little guidance, minimal confidence, and no clear default. In a landscape where people typically don't engage, choice without structure risks poor outcomes.
A missing piece in the retirement puzzle
While services like Pension Wise and MoneyHelper offer valuable help they rely on individuals making the active decision to seek support. The evidence shows that only a small minority do. This leaves the many exposed to risk at a time when they need help the most.
The Financial Conduct Authority's investment pathways were a welcome development but are limited in scope and duration. There is still a significant disconnect between the complexity of decisions faced by savers, and the information, support, and products currently available to them.
This is where the PLSA's Guided Retirement Income Choices (GRIC) framework comes in.
GRIC: A practical, deliverable solution
Our mission at the PLSA is to help everyone achieve a better income in retirement. GRIC was developed to help schemes, trustees, and providers offer meaningful support to savers in decumulation.
It sets out three key elements:
- To guide and inform savers: Using a saver engagement journey based on behavioural economics, GRIC proposes a "path of least resistance" approach. This allows schemes to signpost savers to a suitable retirement income solution – either inside or outside the scheme.
- To deliver well-designed solutions: GRIC defines minimum product standards to ensure schemes manage the complex risks their members face. Retirement solutions might include a short-term cash fund, a medium-term growth component to protect against inflation, and the option of a guaranteed income in later life, such as an annuity.
- To support schemes to deliver: Governance standards are essential to underpin these solutions. Providers and trustees must be empowered to take action on behalf of members, while remaining within regulatory boundaries.
This structure enables schemes to offer more than just theoretical freedom. It gives disengaged members access to suitable defaults and informed savers clearer choices. Some providers are already leading the way with innovative blended products or targeted signposting—but this must become the norm, not the exception.
Policy momentum
We were pleased to see the government's 2023 consultation Helping Savers Understand Their Pension Choices mirror many of GRIC's principles, particularly the proposal for a statutory obligation on trustees to provide retirement solutions. But the proposals focused largely on product provision.
We believe that the guidance and communications savers receive are critical too. With the Pension Schemes Bill on the horizon, there is a once-in-a-decade opportunity to fix the decumulation dilemma. We hope the government ensure the legislation embeds support, not just access. A robust statutory framework must include product provision, communications, signposting, and governance.
Metrics that reflect outcomes
A live debate continues about how to measure success in decumulation as part of the Value for Money (VfM) framework. Do we wait for solutions to develop before creating metrics, or create metrics now and risk locking in unintended consequences? These solutions will fast become a differentiator between schemes, so in future, ensuring savers get the best possible value in retirement will be a key part of that initiative.
The PLSA believes metrics must reflect real-world outcomes and be flexible enough to allow for innovation, particularly in how risk is managed and income is sustained over time.
Looking ahead – freedom with support
The next decade must be defined not just by freedom, but by structure and sustainability. GRIC offers a practical framework to get us there - one that balances flexibility with security and puts savers' needs first.
Better decumulation support must also go hand in hand with improved engagement and understanding. That's why the PLSA continues to champion the Retirement Living Standards, helping people picture their life in retirement, and our Pension Attention campaign, designed to boost pensions awareness across the UK.
Pension freedoms were about empowerment. The next chapter must be about protection and delivery. Now is the moment to make the best pensions access options accessible to everyone.
Ruari Grant is head of DC and master trusts at the Pensions and Lifetime Savings Association
