A one-size-fits-all approach does not work at retirement

The problem of how employees access their defined contribution (DC) pension schemes to draw pension income i.e. ‘decumulate’ seems to be a growing issue in the pension’s industry. The debate on the topic has centred on the need for innovation to create a new ‘default’ option to replace annuities, where a product can be accessed by employees to solve all of their needs; but is this really the answer?

Jonathan Watts-Lay, director of WEALTH at work, said: “With income drawdown now the most popular form of decumulation and the old default of an annuity being inappropriate for many, employers need to act quickly to provide a suitable alternative for this new world.”

He added: “Many in the industry are waiting on a new default product to replace annuities and solve all retirement needs. However, I strongly believe that a new product is not the answer; as once in active retirement, a one size fits all approach does not work.

“Not only this, but there is also the danger that employees could throw away their hard earned retirement savings by investing in inappropriate products, or perhaps even worse by falling prey to a friendly scammer.

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“Employers need to evolve with the times by adopting a service model; this would provide the support needed for individuals to access the right retirement income options throughout retirement, whether that is guaranteed income, flexible income, growth potential or a combination of all. Advantages include better tailored retirement income options for employees, and provision through the entire retirement journey.

“This calls for a new breed of service provision. WEALTH at work is at the forefront of this – educating, guiding, advising, implementing and managing retirement planning for employees throughout their retirement; helping to ensure the right income as needs change throughout retirement.”