In its final report on pension freedoms, the work and pensions select committee is calling for the introduction of a ‘default decumulation pathway’ and a single pensions dashboard for information, as a way of protecting those on low incomes or who are disengaged with pension arrangements
The committee said it wants to see a new, simple, standard drawdown pension, and says the government should allow NEST, the government-backed defined contribution (DC) pension scheme established to support automatic enrolment to provide de-cumulation products from April 2019.
It also wants every pension provider offering drawdown to offer a default de-cumulation pathway suitable for their core customer group by the same deadline, subject to oversight by existing independent governance committees and subject to the same 0.75% charge cap already in place for accumulation in automatic enrolment.
The committee said the case has been made for a single, publicly hosted pensions dashboard covering state, defined contribution and defined benefit pensions, funded by the industry levy, and in place by April 2019.
MPs said the multiple dashboards currently planned, hosted by different providers, would only ‘add complexity to a problem crying out for simplicity’ and argued that competition between pension providers over the presentation of the required information risks countering competition in the pensions market.
Instead, government should mandate all pension providers to provide the necessary information to the single pensions dashboard, hosted by the new single financial guidance body – with an extended timetable for smaller legacy DB schemes to comply.
Other recommendations include requiring pension providers to offer single page pension passports as a way of increasing consumer engagement with pensions options.
The committee also wants greater use of technology to provide advice for those with smaller pension pots, for whom traditional sources can be expensive. It called for the Financial Conduct Authority (FCA) to report on outcomes from automated advice with a view to reassuring potential customers that it can be a useful service, and strengthen the advice offer.
Frank Field, chair of the committee, said: ‘Automatic enrolment has been a runaway success, bringing millions of people on board in saving for their retirement.
‘We want to expand that success story so that everyone, no matter how they are saving, has a simple, suitable, default pension option, with a low, capped fee.
‘From that solid base, those who want to choose other options would retain complete freedom to do so. They would be armed with a new range of clear, transparent information in making their choices.’
Pension freedoms report is here.
Report by Pat Sweet
