Smart Pension and L&G are set to launch the first default retirement pathway in the workplace pensions sector.
According to Smart Pension, the product will pay a regular income up to the age of 80, followed by the purchase of an annuity to provide for the latter phase of retirement.
The fund will be divided into four pots being: drawdown, rainy day, annuity and IHT. Members will be able to access all accounts other than the annuity, while receiving a steady income.
Smart Pension is to design and deliver the digital user and customer journey and the fund will be invested with L&G.
The product is expected to be delivered in 2019, subject to testing, Smart Pension has
“We feel there is a clear need for a guided pathway to help people navigate the new pension freedoms so that they can take control of their investments post-retirement and much more easily plan financially for the next phases of their life,” Smart Pension director of business development Paul Budgen said.
“There is an urgent industry need for innovation in this area, so we see this as helping to plug that industry gap by making sure people can have the confidence to take control of their savings post-retirement,” Budgen added.
Last month, the Work and Pensions Committee called for pension providers to offer default decumulation pathways for members.
According to the Pension freedoms report, the Committee supported the Financial Conduct Authority’s recommendation that every pension provider offering drawdown should be required to offer a default decumulation pathway, suitable for its core customer group.
The Committee expects that this option will cater to the needs of uninformed savers who do not actively consider their pensions or understand their options. It has called for its recommendation of a default drawdown option to be in place by April 2019 and to be overseen by an existing Independent Governance Committee.
Commenting on this product offering, The People’s Pension director Roy Porter said: “When faced with what can be a daunting and often complex array of options, currently many retirees simply cash in their pensions as early as possible. They risk being hit by a hefty tax bill, missing out on investment growth and critically running out of retirement income if they live longer than planned. There is a clear need for a guided pathway in retirement for savers, and we, like many master trusts, are currently working on the details of product design.”