Concerns around the government's plans for a new decumulation framework have emerged ahead of the consultation close on 5 September, as industry experts argued that, fundamentally, trustees should not develop a decumulation offer.

The government recently launched a consultation on plans for a new policy framework for supporting individuals on how to use their defined contribution (DC) pension at the point of access, which would require trustees to offer a range of decumulation services.

Industry experts previously shared support for the government's plans, but suggested that, given the "huge number of interlinking pension developments", the government should consider a stage approach to the plans.

Echoing this, Hymans Robertson partner, Kathyrn Fleming, agreed that the government’s aims could be achieved through a step-based approach, although the proposed stages of this phased approach were slightly different from previous industry suggestions.

“Firstly, all DC trust-based schemes should be required to provide a solution to support a member in accessing the full range of the pension freedoms," she explained.

“Secondly, master trusts and pension providers should be asked to design a default solution for any member that does not wish to make any active choices at retirement.

“Thirdly, DC trusts and hybrid scheme trustees should be required to put in place a default decumulation solution.

"This phased approach will allow for innovation to have a credible chance of success, balance the risk appetites and budgets of employers and trustees, and play to the strengths of trustees.”

However, Dalriada Trustees’ response to the consultation argued that, fundamentally, trustees should not develop a decumulation offer.

Instead, it argued that helping savers to understand their pension choices at the decumulation phase is an educational focus and requires member engagement from employers.

"Pensions structural design is for the employer to determine for its workplace pension," it stated. "The transitional phase and full decumulation are inextricably linked with the savers’ personal financial planning requirements, which is not the remit of trustees."

In its response, the firm explained that more and more savers will use a transitional phase in future, sat between accumulation and decumulation," it stated.

"During this phase, when savers will be accumulating and decumulating simultaneously, the employer will need to structure the suitable suite of products to support its wider financial wellbeing proposition for its employees," it stated. "This is really not a trustee matter."

And involving trustees in this issue more would require a "substantial improvement" in trustee knowledge and understanding (TKU), according to Dalriada Trustees.

"Historically trustees have had very little experience of decumulation and almost none in the transitional phase," it stated.

"For trustees to determine an appropriate suite of products for the transitional and decumulation phases would require trustees to have a very good understanding of personal financial planning."

"There would also a potential challenge for The Pensions Regulator (TPR) to implement the appropriate regulatory supporting framework and TKU expectations."

Share Story: