Three quarters (75 per cent) of defined contribution (DC) pension savers aged 55 or over want to receive their pension income automatically when they reach retirement, research from Hymans Robertson has found.

The research also found that more than eight out of 10 (83 per cent) of individuals would like their retirement savings to automatically start paying an income from state pension age or sooner.

Hymans Robertson’s Designing Decumulation Defaults – Remember the Member paper argued that a member-centric default decumulation is needed as a safety net for any member that doesn’t make their own choices about, or actively engage with, their retirement income.

The firm also claimed that too many members are at risk due to ‘lost opportunities, expensive mistakes and fundamental confusion.’

Hymans Robertson head of DC at-retirement services, Kathryn Fleming, said that the industry is trying to find a solution to the “need for DC pension pots to deliver sustainable income in retirement”.

She continued: “There’s an ambition to get as many people as possible to engage with their retirement savings, but there will always be a significant number of people who won’t engage.

“It’s therefore essential that there’s a safety net in place for these individuals to give them the best chance of having good retirement outcomes.”

Fleming acknowledged that "schemes will be starting from different positions, with different regulatory requirements and different membership profiles".

“The decision makers will also have different risk appetites, strategic objectives, commercial synergies, so differing solutions will evolve," she added.

The study also found that opt-out, employer review safeguards, and timing around state pension age or earlier, are all important to savers.

The paper outlined key principles for providers to consider in scheme design, including identifying risks, priorities around member needs and strategic objectives, and understanding how solutions fit member behaviour once they reach retirement.

Commenting on needed developments, Fleming said: “There are a number of options that are already available or are being explored by the industry that may feature in default decumulation solutions.

“These include annuity, income drawdown, and CDC, as well as longevity pooling and blended solutions.

“We would encourage providers to really seek to understand their average member’s needs now and in the future.

“What members want or need from their DC retirement savings is exceptionally personal and varied, therefore the approach taken to designing something for an average member is going to require a lot of careful consideration.”

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