The Pensions and Lifetime Savings Association (PLSA) has called on the government to introduce legislation for a new set of product, communication and governance standards to support pension freedoms.

This legislation would require pension schemes to provide helpful guidance and sign-posting to suitable products, which the association said would allow product providers to build retirement income solutions that blend the best features of cash, drawdown and annuity products commonly used for retirement today.

This new system of support and guidance has been dubbed Guided Retirement Income Choices.

The PLSA acknowledged that pension freedoms had given people “new possibilities and options with their savings”, but added that a bridge was needed to aid them through “the complex decisions they must take to access their pension saving in retirement”.

Furthermore, the organisation argued that the success of automatic enrolment had been “undermined” by a failure to build on the pension freedoms and take better account of the new risks faced by savers.

It pointed out that there were significant barriers to providing suitable decumulation options, with these including the assertion that savers are not in an appropriate position to assess their best options and schemes being deterred from offering the right products due to litigation and regulatory risks.

Outlining its proposals, the PLSA explained: “Many people struggle to receive the guidance and advice they need to make informed decisions about how they access their pensions. It is our belief that the support savers need cannot come from guidance services alone, particularly because weak engagement levels are likely to result in take up rates remaining stubbornly low.

“The real and perceived cost of advice is also likely to be a deterrent for the average saver. In our view, the future decumulation market will instead need to include a wraparound advice model including simplified advice alongside innovative, mass market solutions to provide support, and enhanced guidance.”

The PLSA also emphasised that its proposals were not intended to displace current regulatory approaches or guidance services but instead to supplement them, noting that the government-backed Money and Pensions Service would still play an essential role in its approach.

PLSA director of policy and advocacy, Nigel Peaple, said: “The pension freedoms revolutionised the way in which people can access their pension savings; now it is time to build on them to support people in making the retirement decisions that are right for them.

“As the pension system matures we want schemes to be able to provide better information and more suitable, blended products to help savers manage the opportunities and challenges they encounter, whilst continuing to offer a full range of choice and freedom.

“Guided Retirement Income Choices is a framework that allows schemes to more effectively help savers balance the longevity, inflation and investment risks they face to make the most of the opportunities they have at retirement.”

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