Savers must be supported during current economic volatility amid concerns the value of some defined contribution (DC) pots has fallen, The Pensions Regulator (TPR) has stated.
In a guidance statement aimed at DC trustees, TPR stated that, savers in so-called “lifestyle” funds need to understand whether the strategy they are in as they approach retirement, is consistent with their plans on how they intend to access their retirement benefits .
Concerns around lifestyle funds were previously highlighted by industry experts, after analysis revealed that market volatility had seen falls in the average annuity-hedging fund, prompting broader concerns around the future of such lifestyle strategies.
TPR’s statement therefore sets out how trustees should communicate with savers to help them understand what a fall in their DC pensions means for them, depending on their personal circumstances, and to avoid making hasty decisions that could lead to risks such as being scammed.
In the guidance, TPR also stated that, while those who are early in their savings journey can take a longer-term view on their investments, savers who are close to retirement could be impacted depending on the investment strategy of their scheme.
TPR executive director of regulatory policy, analysis and advice, David Fairs, commented: “Our guidance statement aims to ensure trustees are communicating properly with savers about their options, and to encourage them to seek free impartial guidance from MoneyHelper, and to ensure their current governance and investment structures are appropriate.
“There is no one-size-fits-all answer in these difficult times, and scheme specific circumstances are important. However, we expect all trustees to consider the issues raised in this statement and take appropriate action as part of their ongoing governance responsibilities.”
Alongside this, the guidance statement reminded trustees that they should be reviewing governance structures investment advisers’ remit, the characteristics of their scheme’s saver profiles and their scheme’s investment arrangements and implementation.
It also highlighted communication with savers as “vital” to ensure individuals have enough information to make informed decisions about their savings, and to avoid hasty decisions that could impact retirement outcomes or leave them vulnerable to scammers.
TPR additionally directed that trustees should review the level of support being given to savers; for many savers, the first time they make an active decision about their pension will be as they approach retirement.
Speaking on the topic of communication, Minister for Pensions, Laura Trott, stated: “It’s essential that people have the support and information they need to make informed choices about their financial futures, particularly in challenging economic circumstances, so I welcome TPR’s guidance statement. “
Adding to this, Money and Pensions Service head of money and pensions guidance, Carolyn Jones, highlighted the guidance as a “timely and welcome statement” that will provide “crucial guidance during these challenging times”.
“Pensions can be complex and the decisions people make can have long term effects, so it’s important for them to seek help before rushing into anything, no matter how large or small their pension pot is,” she stated.
“Trustees can help by promoting this message and signposting people to the support they need, such as our free, independent MoneyHelper service. With the right resources and information, everyone can make the decision that works for them and their individual circumstances.”