LONDON - Louise Davey from The Pensions Regulator (TPR) addressed the complex issue of pension decumulation during an ABI webinar Today. She outlined TPR's strategy to transform UK pension schemes into full-service providers that support savers from the accumulation phase through to retirement.
Davey highlighted the limitations of current trust-based pension schemes and underscored TPR's support for the Department for Work and Pensions (DWP) proposal to mandate these schemes to offer decumulation products and services. She emphasized the evolution of the UK pensions market towards fewer, larger, and better-managed schemes.
The TPR's Chief Executive has proposed five principles to guide this transformation. These principles focus on maximizing value, supporting decision-making, mitigating risks, offering personalized decumulation choices, and providing comprehensive saver support. Davey discussed several challenges in achieving these goals:
- Assessing value for money in decumulation services
- Innovating product design
- Engaging savers effectively
- Enhancing understanding of membership data
- Managing multiple small Defined Contribution (DC) pension pots through consolidation strategies
- Overcoming difficulties when partnering with third-party retail sector providers
- Ensuring schemes have the capacity and capability to offer retirement products
Davey also noted TPR's initiative to introduce 'collective defined contribution' schemes as part of their innovation efforts. The upcoming review by the Treasury and Financial Conduct Authority (FCA) on the advice guidance boundary was mentioned, along with the importance of schemes working confidently with the FCA.
Acknowledging the role of Money and Pensions Service (MaPS), charities, and independent financial advisers in providing guidance, Davey stressed the need for affordable independent financial advice. To address these challenges, TPR is planning virtual roundtables in 2024, aiming to gather insights and foster collaboration within the sector.
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