The Pensions and Lifetime Savings Association (PLSA) has opened a consultation on a solution to protect people who do not engage with or understand the financial choices they face when reaching retirement.

The consultation seeks views on proposals to establish a new regulatory regime that will require pension schemes to support their members when making decisions about how to access their pensions, through means such as offering or signposting to products that meet minimum quality standards.

The PLSA recommended this regime include requirements for member engagement, decumulation products and processes relating to the design, selection and ongoing delivery of the two previous elements.

The aim is to provide a proper framework that helps deliver a broadly consistent customer journey for savers across all the pension savings they may have.

The move comes after research from the organisation found that nearly three-quarters (71 per cent) of savers in defined contribution (DC) funds wanted support when deciding how to access their pension, including some wanting to be guided by their pension scheme to a ready-made retirement income option.

The survey of 2,000 pension savers and retirees showed that nearly a third (30 per cent) of respondents either didn’t know about or understand their options, with only 28 per cent having a clear plan on how they would take their money.

The PLSA said evidence showed that the range of options provided by pension freedoms “is potentially leading to poor decision-making and poorer retirements”, stating that “too often the complexity results in people ‘choosing not to choose’ or taking a decision that may not be in their best interest”.

The call for evidence closes on 4 September 2020, with PLSA intending to publish final recommendations in October 2020 following analysis of the responses.

PLSA head of DC, master trusts and lifetime saving, Lizzy Holliday, said: “Pension schemes want to support savers more effectively than at present by improving the help they get when they are thinking about drawing their pension and setting a path that protects them from poor outcomes. But many are looking for the support of a clear framework.

“Our proposals seek to provide support to savers to make better decisions and give clarity to schemes about their obligations towards savers at this stage of their retirement savings journey. We look forward to hearing the views of everyone with an interest in ensuring more people achieve a better income in retirement.”

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