The UK government has launched a consultation on plans for a new policy framework for supporting individuals on how to use their private pension savings at the point of access, which would require trustees to offer a range of decumulation services.

As reported by our sister publication Pensions Age, the Department for Work and Pensions (DWP) said that its previous call for evidence revealed a need to act in order to encourage members of most workplace pension schemes to become more engaged with their workplace pensions, and support members to make informed choices about how to optimise their later life income.

The consultation therefore aims to address this need, with the DWP arguing that placing responsibilities on schemes and trustees to offer decumulation solutions to each of their members will give individuals access to a range of options to help them optimise their pension savings for later life income.

In particular, the DWP said that it agreed with the "overriding" view of most respondents that an individual should expect to receive a level of help and support from their pension scheme when they wish to access their pension savings.

However, it also acknowledged that individuals have the ability to choose how they want to use their pension pot, with the policy proposals therefore designed to offer a level of support for those who find the decisions they need to make at the point of access daunting and help trustees provide members with default options for those who are less engaged.

The proposals also aim to establish a broad alignment in the service offer among different providers where every pension scheme, either directly or through a partnering arrangement, provide decumulation solutions for their members.

However, the DWP clarified that it is not looking for precise consistency across schemes, acknowledging that schemes should adapt the offer based on their membership.

Instead, the proposals would look to place a duty on trustees to offer decumulation services, which are suitable for their members and consistent with pension freedoms.

Members would then be given the choice to use the default service offered by the scheme or access the products and services available under the pension freedoms if they choose.

The consultation also acknowledged that the DC decumulation market is still developing and evolving, with several pension schemes continuing to invest time and effort into developing solutions they believe will provide their members with the best outcomes.

Given this, the DWP emphasised that it does not want to prevent this innovation in the market from continuing.

Commenting in the ministerial foreword, Pensions Minister, Laura Trott, stated: “I am very grateful to all who took the time to provide comments to inform our policy thinking. I am launching this consultation to set out our proposals for, and seek views, on a decumulation framework that will provide support at the point of access.

"In addition to the existing choices available to members under the pension freedoms, this could include an offer of a CDC arrangement in retirement.

“My objective is to help savers achieve better outcomes through provision of CDC, where members can benefit from greater investment opportunities and consolidation in the market whilst supporting the wider government agenda around productive finance.

"Taken together with the reforms I consulted on to expand CDC schemes to multiemployer schemes, these proposals provide the foundation to build on my longer-term vision to improve fairness, predictability and adequacy for savers.

“This is a real opportunity to help shape the next stage in one of the most challenging and significant issues in private pensions. That is why I encourage all interested parties to respond and play their part in helping improve outcomes for todays and tomorrow’s pensioners.”

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