The defined contribution pensions scheme landscape has changed for those entering into retirement and it seems the wide-reaching reforms that came into effect in April have began to evolve how pensions are delivered to employees in terms of member support and at-retirement investment design.
But according to the Defined Contribution Investment Forum’s At-retirement solutions for the new pensions era report, published in April, the impact of the reforms on scheme redesign has been more limited than expected.
It also found that many schemes are planning to introduce self-select options for each possible retirement option now available, such as an annuity, going into drawdown or taking a cash lump sum.
Early analysis by several providers indicated many employees were more likely to take savings as cash or go into drawdown. The Association of British Insurers reported that its members alone dealt with more than 200,000 calls in the first week.
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Subsequent research by law firm Linklaters, published in May, found that almost 20% of pension schemes will offer flexi-access drawdown facilities as a result of the reforms. It also found that 46% of schemes plan to offer a degree of access to the new flexible lump sums, with a preference for a one-off option for members to take their entire pot as cash at retirement.
But despite the spike in interest from members, calls have gradually declined and the worries of people spending their pots after taking them as cash have abated.
Richard Parkin, head of retirement at Fidelity Worldwide Investment, said: “Calls have gradually declined and stand at around 30% lower [then when the reforms were first introduced].
“We have also seen a shift from [members] keen to get hold of their smaller pots in cash to a greater trend of people looking to ask questions about what their options are.”
Will Aitken, senior consultant at Towers Watson, added: “The significant increase in call volumes is beginning to fall slightly compared with March and April 2015, which we anticipated. We know that call volumes are significantly driven by events and press coverage and much will be dependent on any further change brought about by the new Conservative administration.”
Some employers have taken a proactive approach to educating their staff about the options that are now available to them.
Meanwhile, Roffey Park offered employees a guide highlighting the different options available and ran one-to-one meetings with its pension provider, Standard Life, to discuss individual requirements and questions.