Retirement Income CPD Course 

Can government and industry help ease the transition from accumulation to decumulation?

This article is part of
Guide to how the pension freedoms have changed the pensions landscape

Can government and industry help ease the transition from accumulation to decumulation?

So far this guide has highlighted some of the misunderstandings which have occurred among clients since the freedoms came in, while acknowledging the usefulness of more flexibility at retirement.

There have been numerous concerns, mainly voiced by advisers and those within the pensions industry, that without more government and industry help, many individuals will succumb to pensions scams.

One of the steps being taken by both the industry and the Department for Work and Pensions is the Pensions Dashboard, which aims to help people keep track of all the pension pots they have accumulated throughout their working life.

This is on the basis that a working adult will have, on average, 11 different jobs during their lifetime and that £400m of pensions go unclaimed.

The Dashboard is set to launch in 2019 but with that date some way off, there is a chance those seeking help with their retirement plans this year will be left floundering.

Anthony Rafferty, managing director of Origo, explains: “The Pensions Dashboard could bring together details of every retirement plan a person holds in one, accessible and simple screen so that they can be fully aware of the provisions they have now. 

“And this could be just the first step in helping our population prepare for, and understand the costs of, retirement.”

But can and should the government and industry be doing more to make the transition from accumulation to decumulation any easier and simpler for clients?

Ticket to retirement

Verona Smith, head of platform at Seven Investment Management, asserts: “All of us in financial services – from advisers, to product and investment providers, right up to the regulator – should have one core objective and that is to make pensions understandable to everyone.

“We need to remove the complication, jargon and general confusion.”

She continues: “Everyone should understand that their pension is their ticket to the retirement lifestyle that they desire.

“Unless you know the winning numbers for next week’s lottery your pension is your answer to your own retirement dreams.”

Pension freedom is no guarantee of a richer retirement, confirms Stephen Lowe, group communications director at Just.

“People have more choices, but need to understand their options to avoid the many pitfalls – exceeding their own capacity for investment risk, overpaying tax and falling for scams,” he points out. 

“Professional advice is one way to overcome lack of engagement and knowledge about the options and how the market works. Impartial guidance through Pension Wise is available for free but too few take it. 

“Our view is that, like auto-enrolment that has seen pension membership rise significantly, guidance should become the default option unless people explicitly opt out.”

For many, better communication from the pensions industry is the answer.