Default retirement pathways could result in members losing out

Pensioners defaulting into decumulation pathways at-retirement without financial guidance risk losing out on retirement income, according to Wealth at Work.

Its recent survey found that 86 per cent of respondents believed that employees with a DC scheme should not be defaulted into a decumulation pathway without financial advice when they retire “to protect individuals from making poor decumulation choices”.

Commenting on the findings, Wealth at Work director, Jonathan Watts-Lay said: “I don’t believe that anyone should be defaulted at-retirement without receiving financial guidance and making a proactive decision first.”

The Financial Conduct Authority has recently announced a consultation on how to implement default investment pathways for non-advised individuals entering drawdown.

Watts-Lay continued: “Defaulting individuals into something without a positive choice being made raises questions over if it’s within the pension providers or the member’s best interest and the effects could be costly.

“After all, it discourages shopping around and risks destroying freedom and choice in pensions.

“Additionally, if those with more than one pension default based on individual pots rather than the collective value, the likely outcome will be sub-optimal with many losing out.”

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