L&G assessing new pension decumulation default

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L&G assessing new pension decumulation default

Legal & General has revealed the biggest challenge it faces with defined contribution (DC) pensions is finding a default decumulation solution to suit those that reach retirement who are not engaged.

Speaking yesterday (29 November) at a Pensions Management Institute seminar in London, Simon Chinerry, head of defined contribution solutions for Legal & General Investment Management, said there is a group of savers entering retirement that "remain defaulted and pretty un-engaged" with their pensions.

Mr Chinerry said: "Our obsession at the moment is to think about what happens to all these people, [which] maybe won't have significant money [in their pension] but they are not immediately falling back into the state.

"How can we manage them through, even an interim period, of retirement? That is what is keeping us at night.”

How can we manage them through, even an interim period, of retirement? That is what is keeping us at night.Simon Chinerry

According to research published last month by the Financial Conduct Authority (FCA), a quarter of people who have accessed a defined contribution pension in the past two years do not know how they did so.

A survey published this month also showed that some of the most popular platforms don’t offer a full range of pension withdrawal products for those entering retirement with only drawdown being widely available.

The pension dashboard, which should be introduced in 2019, has been pointed to as a tool to help savers plan their pensions decumulation phase.

Legal & General is currently assessing what would be the optimal solution for these savers.

Mr Chinerry said that the goal is to look after these individuals in a similar way to what happened in the accumulation phase.

He said: "My view on it is that it is non-advised, it has got to be simple, transparent, cheap probably, and it has got to be flexible - people need to be able to take the money in retirement, but equally [have] something that could still grow with some eye to some kind of guarantees."

maria.espadinha@ft.com