The Pensions Regulator (TPR) has urged defined contribution (DC) trustees in the UK to ensure that they are protecting savers amid market volatility, warning that older savers could be disproportionately impacted by the recent economic turbulence.

As reported by our sister publication Pensions Age, TPR director of regulatory policy, analysis and advice, Louise Davey, noted that headlines such as 'UK gilts tumble again as inflation fear spreads through market' have been common in the press recently, stating that “trustees must take note”.

While Davey noted that the impact on defined benefit (DB) investments appear to have settled, she stressed the need to ensure that trustees do not "sleepwalk into a DC crisis for savers approaching retirement".

“We issued a clear message in January that savers must be supported amid concerns the value of some DC pots has fallen. That message remains just as relevant today," she stated.

“So today I am once again calling on DC trustees to use our guidance to protect savers who are close to retirement and could be impacted depending on the investment strategy of their scheme. These are the savers with the least time to make up losses.”

Older savers are being disproportionately impacted as historically lower-risk investments are suffering, according to Davey, who highlighted the recent interest rate rises as demonstration of the need for trustees to ensure their bond investments align with member choices at retirement.

In particular, she stressed the need for trustees to focus primarily on outcomes, not just driving down costs, and ensuring that they receive good and timely information on performance and risk for different member cohorts, and the attribution of those risks.

She also said that trustees need to ensure their default pre-retirement strategy is targeting the right outcome and is fit for purpose in the current market environment.

More broadly, Davey suggested that recent increases in the value of equity markets are good news, with projections showing that younger and mid-career savers should recover their losses sooner rather than later.

However, she said that trustees need to be mindful that these early signs of recovery are unlikely to be fully reflected in the annual benefits statements they will sending to savers in the coming months.

“We expect trustees to guard against the risks of savers making knee-jerk decisions which could harm their retirement plans,” Davey continued, suggesting that the next benefit statement could prove a key turning point for many savers.

“We urge schemes to engage with savers approaching retirement to review and update their choices," she said.

"If savers change their mind over the benefits required or about the time when they expect to take them, this could significantly impact their pension pot outcome. Schemes should encourage savers to consider these issues when they see their annual pension statement.

“The annual benefit statement cycle is an important opportunity to explain the implications and while trustees cannot give savers financial advice, they should signpost them towards sources of appropriate advice and guidance, notably Pension Wise and Money and Pensions Service, to improve the chances of savers making good decisions and realising their retirement goals.”

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