Providers of defined contribution schemes need to “vastly improve” their digital offers so members can make the right choices in decumulation, warns Hymans Robertson.
In a report published on November 22, the consultancy stated that there is a raft of issues providers need to consider to minimise future retirement funding risks for members who are reliant on DC pensions as their main source of income.
The research, based on a survey of 2,005 respondents in the 50 to 70 age bracket, showed that members value certainty and flexibility but are not well placed to achieve this alongside the consequences of living longer.
According to Hymans Robertson, providers must use technology and enable members to utilise a range of different products – pension drawdown, annuity, savings vehicles and property – to meet their needs through retirement.
The survey showed that savers with pots of more than £250,000 had the greatest awareness of all available pension financial products, with 80 per cent and 82 per cent being aware of drawdown and annuities, respectively.
In contrast, for those with pots up to £100,000, only 56 per cent were aware of drawdown and 58 per cent were aware of annuities.
The consultancy argued that implementing digital tools could help tackle social inequality, as those with smaller pot sizes often have lower awareness of their retirement options and are therefore less likely to make decisions that maximise the income they could get.
Hymans Robertson head of digital wealth Paul Waters argued: “Consumers need the right support, guidance and protection today – they cannot wait until the future.
“As an industry that is responsible for delivering good outcomes, a slow evolution in the sophistication of products and support available for individuals to manage their retirement income needs is not enough.”
Walters noted there are “key opportunities for providers to help individuals improve outcomes through retirement”.
“Firstly, by taking a more holistic approach to retirement planning and helping individuals understand how their various assets could be used to help them achieve their retirement plans,” he continued.
“Secondly, by providing guidance on sustainable income drawdown levels on an ongoing basis through an individual’s retirement, reflecting both their personal circumstances and changing market conditions.
“Finally, once pensions dashboards are fully operational, building in the ability to have all pension pots in one place allowing for easier assessment of their overall position and a smoother consolidation process.”
Maria Espadinha is the editor of Pensions Expert, FTAdviser's sister publication