Pensions: what's new this week - 13 November 2023
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Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
This week we cover the following topics: TPR speech on DC decumulation; King’s speech – no significant pensions announcements.
TPR speech on DC decumulation
The Pensions Regulator (TPR) has published a transcript of the most recent in a number of speeches given by its CEO, Nausicaa Delfas, this time focusing on DC decumulation. This follows on from the DWP’s consultation on the subject, which suggested that all schemes should offer decumulation products either directly or through partnerships (read more). The speech notes that a response to that consultation should be published “in the near future”.
Ms Delfas discussed five principles for “what good looks like” for decumulation:
- Value for money. Schemes should help savers to maximise the value of their pension savings into and throughout retirement. Value should be considered holistically, not just focusing on cost. TPR believes there should be a “real onus on the pensions industry to promote solutions which help members extract more value from their savings”, and is supportive of the government’s promotion of Collective Defined Contribution solutions.
- Assistance with decision-making. There should be a guided pathway through accumulation, decumulation and retirement. Particularly for decumulation, savers need to be helped: (i) to find lost pension pots and consolidate those pots; (ii) to ensure they are on track to qualify for the maximum state pension; and (iii) to understand what pension income they are likely to accrue, what that might mean for their living standards in retirement and what to do if that is insufficient.
- Trustees should consider the best interests of DC savers. They should pro-actively help to mitigate the risks savers face at and in retirement, such as investment, sequencing, inflation and longevity risk, through guidance and the design of the decumulation products they offer.
- Innovation of decumulation choices. Savers should be offered several pathways, including products which provide flexibility and more certain income streams and a combination of the two, and which consider financial and family circumstances in the round.
- Schemes should provide wrap around and personalised support in the lead up to and during decumulation and in post-retirement. Support should be targeted at those who need it most and who are at greater risk of experiencing poorer later life outcomes, for example: women, people from some ethnic minority groups, people with disabilities and carers.
TPR will engage with industry on the development of these principles through a series of virtual roundtables early in the new year. It will publish interim guidance next year, which will “provide a pathway to decumulation becoming part of the value for money framework by encouraging schemes to set their own metrics”. Fuller guidance will be developed over a longer timescale. The speech also states that master trusts should expect decumulation offering to become part of the supervision conversation.
King’s speech – no significant pensions announcements
Despite speculation that a new Pensions Bill may be announced, the King’s speech, which set out the legislative agenda for the 2023/24 Parliamentary session, did not include any mention of pensions.
One area that may affect trustees in the future is the Data Protection and Digital Information Bill, which seeks to provide organisations with greater flexibility on how to comply with certain aspects of data protection legislation. This Bill, however, remains in the early stages of Parliamentary approval and we will provide further updates as the Bill progresses.