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Helping savers to assess their DC pensions savings: the seven challenges

Wednesday 15 November 2023

Louise Davey, Interim Director, Regulatory Policy, Analysis and Advice of The Pensions Regulator (TPR) gave a speech at the ABI webinar “Support after 50: Wealth, Work and Care”.

Key messages

  • The Pensions Regulator and the pensions sector need to work together if savers are to benefit from good retirement outcomes.
  • That requires a consensus on ‘what good looks like’. Building upon the principles we published last week I am now setting out the challenges we need to address together to achieve those principles.
  • Our job will be to champion and protect the interests of the saver, work to guide and shape the market to enhance the pension system so that over time schemes become full-service providers – pension saving, pot access, and post-retirement support – collaborating with the sector as we do so.
  • And allow room for and work with industry to support innovation rather than passively waiting until issues arise, and as we learn what works, provide constructive challenge to the sector to adopt best practices in the interests of savers.


Good afternoon and thank you for inviting me to speak today to speak about a topic which has been described by the Nobel Prize-winning economist, Bill Sharpe, as the “nastiest, hardest problem in finance”1: the decumulation of pensions.

You’ll all be aware of the challenges which face us. The large-scale accumulation of pension pots has come about largely by inertia, especially via auto enrolment. Converting those pots into the right level and shape of retirement income will require activity and complex decision making by savers.

All these decisions and the associated risks rest on the shoulders of savers, not their pension scheme nor their employer.

This is further complicated as most trust-based pensions schemes do not offer any decumulation services.

Those that do often offer only a single product. This limits choice and can force savers to transfer unadvised into retail sector.

That might be right for some, but not everyone, certainly not for the mass market characterised by the maturing AE generation.

Workplace pension schemes must become all-service

In the UK, the pensions market is evolving rapidly towards fewer, larger, better run and better governed pension schemes.

Our vision, shared by government, is that over time all workplace schemes should become full-service providers. They should provide services for saving into a pension, accessing pension savings and post-retirement support.

Of course, some schemes won’t have the skills, capability, or appetite to do this. To the trustees running those schemes we have long been saying, you should be asking yourself tough questions and consolidating in savers’ interests.

What does ‘good’ look like?

We support the direction of travel being proposed by DWP, notably, to place trust-based schemes under a legal obligation to provide decumulation products and services.

We have been working with them to help shape these reforms. In the near future, DWP will respond to that consultation and set out the next steps.

Today I want to outline the approach we will be taking to help bring those reforms into reality.

We believe that reform should be guided by a consensus on ‘what good looks like’ and how it is assessed. If that consensus doesn’t exist, the positive outcomes we are seeking for savers will not be realised.

Last week our Chief Executive, Nausicaa Delfas, kicked off a debate on ‘what good looks like’ for savers in accessing their pensions by proposing five principles to help shape the conversation.

To be clear, this is not set in stone. We are at the beginning of a conversation, and we are sure these ideas will change as more voices are added to the discussion.

So, what are these principles?

The first is that schemes should help savers to maximise the value of their pension savings into and throughout retirement. All savers deserve value for their money, right the way across their pension saving journey.

The second principle is that savers should be encouraged and supported to make key decisions whilst still saving for their pension, and in preparation for their transition into retirement.

For instance:

  • helping savers to find and consolidate their pension pots
  • ensuring they are on track to qualify for the full state pension
  • advising them on their options if they are unlikely to build sufficient retirement funds
  • and to set a target retirement date so that schemes can adjust their investments accordingly

The third principle is that trustees should consider the best interest of savers and proactively help DC savers to mitigate the risks they face at and in retirement. Whether that’s investment, sequencing, inflation or longevity risk, they should help to mitigate those risks not only through the guidance provided to savers, but also in the design of the products they offer.

The fourth principle is there must be genuine choice for savers in how to decumulate their pension savings considering their personal circumstances.

Savers should be offered several pathways offering products which provide flexibility and more certain income streams and a combination of the two. Pathways which serve people throughout their retirement journey, the early and their later years.

These choices can be delivered in-house by schemes or through differing partnerships with other pension schemes and retail providers in the open market.

And the fifth principle, schemes should provide wrap around and personalised support to savers in the lead up to and in retirement.

Support that is targeted at those that need it most and who are at greater risk of experiencing poorer later life outcomes, and support which is purposeful and leads to something. Giving people agency to navigate their options and to take decisions.

Seven key challenges to make those principles a reality

I want to build upon those principles and describe the challenges we need to collectively address to achieve a good transition into retirement for savers.

The first is determining how we assess value for money in relation to decumulation.

Products for accessing pension savings will form part of a value for money framework that is currently being developed for the DC market. The framework will enable trustees, employers, and eventually pension savers to better understand the value of different services and products on offer.

In the pot building phase, value for money means the investment returns, and services received, for the price paid.

In the retirement phase, it’s not quite as simple, regardless of what method is used. But what is clear is that the focus must be on a holistic assessment of value, not just cost alone.

The challenge is to come up with sound metrics that will measure and provide comparisons for:

  • investment performance, beyond the point a pot is accessed, by reference to risk
  • the value delivered by the suite of products offered to members and the value brought to retirement outcomes
  • and the quality and impact of schemes’ communications and member support, in preparing for access to pension savings, achieving it, and in the post-retirement phase

The second challenge is that we must see more innovation in the design and range of products available to savers.

A generation potentially facing smaller pension wealth needs to squeeze every ounce of value from every pound that has been saved.

That’s why we are playing a leading role to bring ‘collected defined contribution’ schemes to the market, including decumulation only models too in due course. And why we will welcome other moves to extract greater value from DC pensions.

The areas of innovation we need include:

  • to help mitigate the risks faced by savers, in terms of sequencing and investment risk, inflation and longevity risk
  • to take more but measured risk in investing in the lead up to, throughout and beyond the transition to retirement
  • to offer a combination of certainty and flexibility
  • products and services that can adapt to changing needs across the retirement life span
  • to widen choice available to those in the Muslim community who follow Sharia law
  • and to help close the pensions gender gap for women

That will require an honest discussion about appropriate charges for different products, to pay for innovation and added value. But those charges must be justified by impact and performance.

Thirdly, we need innovation around how savers are engaged and given agency to make decisions, not just at the point of access.

We need to break down barriers between the different phases of saving and transitioning to retirement, and beyond. To create a guided pathway supporting savers that runs through all phases.

Access ‘decision trees’ are required which create both a level of understanding for savers and support their decision making. Covering the benefits and risks of their options. Whilst making the process simple enough to generate and retain their engagement.

At the same time advice and guidance provision is needed to support the mass market auto-enrolment represents.

We also need to strike a realistic balance between building generic solutions which can be simply chosen by the saver and giving agency to savers to make their own personalised decisions.

That is likely to require more intelligent on-line tools and a facility to guide savers towards free-to-access face-to-face guidance for those who have complex needs or need extra help.

Before I move on to the next challenge, I know there’s considerable interest about the advice-guidance boundary and the current Treasury-FCA review.

As you will know the FCA and Treasury are planning to publish a discussion paper in the near future.

Trust-based schemes are often too conservative in their practices even where the boundary exists already. Whatever comes of this review we will need to build more confidence working together with the FCA.

This will be needed, as the implication of DWP’s decumulation reforms is that more guidance activity will be required. From schemes themselves as well as working with MaPS, charities and independent financial advisers.

The advice-guidance boundary and other related consumer protections will be a key consideration in how schemes engage in partnership arrangements. That is something DWP, FCA and TPR stand ready to address together.

On a wider front we would welcome any further regulatory or other moves that lowers the cost of independent financial advice to consumers.

The fourth challenge is that schemes need a clear insight of their membership.

We need to have a conversation about what data schemes collect about their members and how they do that. Data needs to be richer than it is currently if schemes are to design user-centric products and to empower savers to take decisions which consider their personal and financial circumstances.

Savers often hold multiple pots. This makes decisions about accessing pension savings more complex and difficult to action. Providing a challenge for both savers and schemes. This is the fifth challenge.

For savers this could mean duplicate communications, and differing decumulation offers from different providers, with different sets of rules and processes. That could lead to savers not being offered optimum solutions because their schemes do not know the full extent of their pension wealth.

Ahead of any long-term options from government, we need practical solutions to this problem.

A harder drive by schemes to encourage pot consolidation, as our principles suggest.

But we should also encourage master trusts to get ahead on consolidating or stapling the multiple pots they have for the same individual.

The penultimate challenge is a set of issues which schemes, and other providers need to resolve around partnering. When schemes obtain their products via third parties including other pension schemes and providers in the retail sector.

It is evident from the responses to the DWP consultation that schemes and providers welcome the flexibility of being able to construct their decumulation offer through partnerships with third parties. But there are some issues to address like:

  • keeping a lid on the costs associated with partnering
  • apportioning liability between the partners and addressing consumer protection issues
  • determining whether the saver remains in the scheme or transfers out, which might depend on what product they choose
  • and what governance arrangements are needed to cover these arrangements

My seventh and final challenge is that facilitating access to pension savings will be a capacity and capability challenge for some parts of the sector, including single employer trusts.

As our CEO warned last week, the long-term expectation is that all schemes should offer retirement products either directly or through partnerships. Modern workforce pensions that offer accumulation and decumulation. If schemes won’t or cannot make that offer, they will come under pressure to consolidate.

Moving forward

In order to progress on these principles and tackle the challenges I have identified we will engage with the sector through a series of virtual roundtables in the new year.

These will inform interim guidance we intend to publish in 2024 which will provide clarity on key issues and encourage the sector to develop their offer early.


We have time before the demand for DC decumulation crests. We must use that time wisely, to innovate, test and learn. If not, we will flounder in waves of maturing DC pensions.

TPR’s job will be to champion and protect the interests of the saver, bringing their voice to the table by working with charities and other groups who advocate for them.

We will work to guide and shape the market to enhance the pension system so that over time schemes become full-service providers – pension saving, pot access, and post-retirement support – collaborating with the sector as we do so.

And finally, we will allow room for and work with industry to support innovation rather than passively waiting until issues arise. And as we begin to appreciate what works, we will provide constructive challenge to the sector to adopt best practices – and ensure that our processes and approach enable innovation in the interests of savers.

Thank you

Footnotes for this section

  • 1 Max, S (2019) How to solve the ‘Nastiest, Hardest Problem’ in Retirement accessed at

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