Commenting on the PLSA’s publication of DC Decumulation: Evolving the Pensions Freedoms – Final Recommendations, Mark Jaffray, Head of DC Consulting, Hymans Robertson, says:

“We are hugely supportive of this initiative and recognise that the area of decumulation in DC pensions is developing and evolving quickly and is one that the industry must address as a priority. Many people are simply not engaged with their pensions and for them to make informed decisions at the point of retirement there will be a need for a great deal of help. There will be a significant impact if consumers sleep-walk into retirement without being supported by good communication, appropriate advice and tools to support key decisions. Financial advice is often inaccessible for the masses, but now data analytics and digital tools, alongside clear communication and engaging guidance, can deliver good retirement outcomes, without advice for many of these members. This will also enable them to side-step dramatic costs on the run up to retirement. We welcome this shift and it is an area where leading providers and schemes are, and will continue to increase, using these innovations to benefit members.”

Commenting on the importance of the right longevity assumptions in these decisions, Mark adds:

“As part of the guidance it is also vitally important that advisers, trustees and members ensure they have a deeper understanding of pensioner longevity and avoid the “flaw of averages”. Analysis from longevity analytics provider Club Vita shows us that there is significant variation in life expectancy across geography and socio-economic groups – a 10 year gap between the longest and shortest lived individuals based on current data for males aged 65. The gap may widen further in the wake of COVID-19. The financial consequences of mis-estimating life expectancy (either due to anchoring expectations to a past generation or to the average) is material. It isn’t just advisers who can serve their clients better by considering personalised longevity forecasts and sustainable drawdown rates, trustees can also provide better guidance. Ultimately members, armed with this knowledge, can make better decisions to ensure a better retirement income.”