An increase in decumulation options offered by defined contribution (DC) schemes has highlighted a ‘fundamental shift’ from a savings system to a pensions system, and smaller schemes should act or consolidate, according to The Pensions Regulator (TPR).

The regulator’s study of the occupational DC market found that 13.4 million members were in DC schemes that offered drawdown at retirement, with larger schemes “leading the way” in supporting members when they reach retirement.

Almost half (43 per cent) of members, represented by 16 per cent of schemes, can access drawdown without leaving their schemes, with the increase in drawdown being offered in-scheme largely driven by master trusts.

Among the largest schemes, 86 per cent offered members at least one retirement income option.

However, fewer than half (46 per cent) of smaller schemes offered members any decumulation product and 43 per cent of all schemes, representing 1 per cent of total membership, offered no decumulation product.

TPR called on smaller schemes to “do more”, and to either act or consolidate in savers’ interests.

Uncrystallised funds pension lump sum (UFPLS) was the most prevalent of all decumulation products, offered by 43 per cent of schemes and available to 98 per cent of all members.

UFPLS accounted for 44 per cent of all members’ withdrawals and 52 per cent of total assets accessed.

Drawdown was the second most prevalent decumulation offering, while regular income in-scheme products were less widely available.

Under a quarter (24 per cent) of schemes offered at least one regular income in-scheme product, although this covered 55 per cent of members aged over 50.

Just 5 per cent of schemes offered more than one regular income in-scheme product, covering 10 per cent of all members.

Schemes with 1,000 or more members were more likely to have access to least one regular income in-scheme product (44 per cent) than those with fewer than 1,000 members (20 per cent).

The analysis was conducted ahead of guided retirement duty for DC scheme trustees being introduced when the Pension Schemes Bill receives Royal Assent.

“These findings herald a transformation in the DC workplace pensions landscape ahead of guided retirement duty, with millions of savers now able to access in-scheme retirement options,” said TPR director of policy, Joey Patel. “This is just the start, however.

“Too many members in smaller schemes are left without support when they reach retirement. This is not good enough.

“We urge trustees to start getting ready for the Pensions Schemes Bill by reviewing their offer and starting to design their decumulation products.

“If you are not able to guide savers into the right retirement options for them, our message is clear: you should consider consolidation into a scheme that can offer value for money solutions.”

TPR said it was working with the government and industry to ensure trustees had clarity and support for the implementation of guided retirement duty.

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