The Investing and Saving Alliance (Tisa) has urged the government and regulators to update four "archaic" aspects of pension decumulation policy to enhance consumer retirement outcomes.

The organisation argued that the decumulation landscape has changed “almost beyond recognition” since the introduction of certain initiatives, with a primary focus now on enabling flexibility in work and retirement.

Considering this, Tisa said that whilst the government is keen to promote innovation in decumulation, it must realise that some of the “archaic” rules that were appropriate in the past now need to move with the times.

“Unlike accumulation where the main beneficial objective is to create a pension pot as large as possible, decumulation is a much more personalised journey specific to individual circumstances," Tisa head of retirement, Renny Biggins, commented.

“We are not calling on widescale reform with this particular set of proposals but would like some enhancements made to the existing framework to reflect the significant shifts we have seen since these rules were originally introduced.”

In particular, Tisa has called for the timing of trust-based defined contribution (DC) packs to be aligned to the Financial Conduct Authority (FCA) requirements to ensure all scheme members are provided with a pre-retirement consistent communication journey.

It also suggested that an additional section covering life expectancy be included, with a reference to the Office for National Statistics calculator to prompt individuals to consider how long their retirement could be, particularly in light of research showing that at least 67 per cent of savers underestimate their life expectancy.

In addition to this, Tisa have added to the calls for the money purchase annual allowance (MPAA) to be increased to the previous limit of £10,000, in order to reflect the “very different landscape” since the £4,000 limit was introduced in 2017.

For instance, the group pointed out that auto-enrolment contributions have increased "significantly", while the impact of Covid has greatly changed working patterns and withdrawal behaviour, with a "very real risk" that for thousands of savers could be "unknowingly incurring tax bills" for continuing to invest in their pension.

Tisa also noted that trust in pensions is low, attributing this to a perceived lack of control, transparency, and an inability to easily access information.

In particular, the group suggested that a pensions tax system which has resulted in over £500m of overpayments since 2015 cannot be considered as “trusted and modern”.

To combat this, the group suggested that HMRC update the PAYE process for pension withdrawals using dynamic coding to ensure accurate tax deductions are made and large-scale overpayments are avoided.

The abolishment of Block Transfer Rules, which enable an individual to retain a pre-2006 protected retirement age (PRA) or tax-free cash (PTFC) on transfer, was also raised as a further recommendation by Tisa.

The alliance explained that anyone with a PRA or PTFC should be able to benefit from the pension flexibility introduced to improve retirement planning and outcomes, clarifying however, that this old rule restricts that ability for thousands of individuals.

Furthermore, whilst Tisa acknowledged that the Finance Bill has proposed easements for those who hold the new 2021 protection, it pointed out that these do not currently extend to other forms of protection, which is not consistent.

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