The default investment strategy available for members in the accumulation phase in Ireland should be implemented in the decumulation phase for members who choose in-scheme drawdown (ISD), according to the Irish Institute of Pensions Management (IIPM).

Publishing its response to the Pensions Authority’s consultation on ISD, the IIPM said it was “broadly supportive” of the proposal. If introduced, defined contribution (DC) schemes in Ireland will be able to offer the option as an additional at-retirement option for members.

Regarding investment, the IIPM said that an extension of the current default investment strategy a member follows in the accumulation phase should be extended, or a dedicated decumulation-phase default investment strategy should be developed.

“A decumulation default investment strategy would need to reflect the different investment objectives that apply after retirement, including managing withdrawal patterns, preserving capital where appropriate, and maintaining sufficient liquidity,” the IIPM wrote.

It warned that careful consideration would need to be given to longevity and ‘bomb-out’ risks. It also highlighted whether it would be appropriate for a member to automatically move from the accumulation default strategy to the ISD default strategy, as another area needing thought.

Furthermore, the IIPM said that advice will be an “important part” of helping members understand their options.

For trustees and providers, it said that they will need to consider whether retaining a member who does not make an active decision in a pre-retirement or post-retirement default investment strategy is most appropriate for them.

“A decumulation default investment strategy, where offered, should provide a clear and well-structured retirement journey for members who actively choose it.

“Schemes should ensure that the investment design, communication materials and decision-making support enable members to understand the purpose of the strategy and how it fits within their wider retirement planning,” the IIPM wrote.

More broadly, the IIPM stated that ISD should “complement rather than replace” existing post retirement options, such as Approved Retirement Funds (ARFs), vested PRSAs, and annuities.

The institute also argued that ISD regulations should mirror the rules that apply to ARFs and vested PRSAs, including minimum/deemed withdrawal requirements and consistent tax treatment.

“This alignment is critical to preventing unnecessary complexity, product bias, or behavioural distortions and is broadly supported across the industry,” it stated.

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