Defined contribution (DC) master trusts are leading the way on preparations for the introduction of the proposed guided retirement duty, although many DC schemes are still not doing enough, research from The Pensions Regulator (TPR) has found.

The survey found that while all master trusts offer decumulation options at retirement, this is not the case across the wider market, as nearly three-quarters (73 per cent) of DC schemes fail to offer any benefit options at retirement.  

Size was found to be a key factor, as TPR found that while 98 per cent of both large and medium schemes surveyed provided support to members with their retirement decisions, nearly a third (31 per cent) of small schemes and 40 per cent of micro schemes offered no support beyond statutory communications.  

The role of scale was also seen in awareness of the upcoming requirements, as while awareness of the proposed duty stood at 26 per cent overall, this varied widely by scheme size.

Indeed, TPR found that every master trust was aware, as were over three-quarters of large (77 per cent) and medium (76 per cent) schemes, yet less than half (47 per cent) of small schemes and 13 per cent of micro schemes were aware of it. 

However, TPR found that DC schemes are taking positive steps to review, launch or partner to provide their members with decumulation solutions in advance of the legal duty proposed in the Pension Schemes Bill.  

Of those schemes that were aware of the forthcoming duty, 51 per cent had started reviewing their decumulation offering, equating to around 8 per cent of all schemes.

In addition to this, it found that 80 per cent of master trusts have reviewed their offer, with around 91 per cent of members overall (around 27 million savers) in schemes that have reviewed their decumulation offerings.   

Given the discrepancy in preparations, TPR chief executive officer, Nausicaa Delfas, suggested that smaller schemes that struggle to support savers with their retirement decisions should consider consolidation.

"“Many small and micro schemes are currently not doing enough to prepare for the duty, leaving their members to navigate complex choices alone as they transition into retirement," she stated.

"Schemes that struggle to support savers with their retirement decisions should consider consolidation into schemes that can offer value-for-money solutions that work for different kinds of savers.” 

However, the survey found that smaller schemes were also further behind on consolidation work, revealing that while one in ten schemes plan to transfer members to a master trust, around three-quarters of micro (76 per cent) and half of small (51 per cent) had never considered it.  

In contrast, 44 per cent of medium and 35 per cent of large schemes have already started the process of consolidation by transferring members into a master trust or plan to do so.

“As the guided retirement duty takes shape under the Pension Schemes Bill, TPR is working with government and industry to ensure trustees have the clarity and support they need," Delfas stated.

“Our new service, TPR Innovation Support, is available to help schemes discuss early-stage ideas as they seek to bring new retirement products to market safely and effectively -- and we encourage schemes to engage with us.” 

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