The consultancy’s inaugural Future of Retirement Income report – launched today (21 February) – asked industry experts for their take on key debates within DC saving.

With the minimum pension age due to increase, the report looked at trends for DC savers nearing and in retirement, including member communications, investment, advice and product innovation.

The report noted with increasing life expectancy and focus on DC pots, the industry should engage with debates, adding that Redington would launch a series of roundtable discussions.

Writing in the report, Redington senior vice presidents Russell Wright, Anran Chen and Arash Nasri highlighted the issue of sequencing risk – when the order of returns and investments is unfavourable – which can lead to members at the same starting point ending up with very different outcomes.

This can be avoided primarily by reducing the equity allocation and using less liquid assets as a buffer from daily volatility, as well as deploying strategies to defend against sudden market shocks. Active, rather than passive, portfolio management during decumulation should also be considered, they added.

The report shares views from industry experts from firms including Capital Group, Quietroom, Sackers, The Lang Cat, Retirement Line, and Moneyhub, among others.

Capital Group director of retirement income Philip May said innovative thinking is needed in asset management, and added “investing in retirement, as opposed to for retirement” was of increasing importance. He spoke of little-known target date fund (TDF) structures, which are widely used in the US, as well as a phased approach to in-retirement investing.

Quietroom writer Sarah Hawke said members start to think seriously about pensions as they approach ages 55 to 60, meaning this is a great time for the industry to increase engagement.

Communications should be made accessible, “human” and multimedia, and there should be reduced pressure on older cohorts to make the right decisions, said Hawke.

Sackers senior counsel Emma Martin questioned whether the industry will see a more “joined-up” approach to DC regulation from The Pensions Regulator, Department for Work and Pensions and the Financial Conduct Authority.

On advice and guidance, The Lang Cat public affairs director Tom McPhail said the industry may need to think about the “unsustainable” rates of regular withdrawals, advising members on equity release and property wealth, and the divide between advice and guidance.

However, new technology such as open banking and open finance could “bridge [the] gap” between advice and guidance, Moneyhub business development director Paul Vaughan said.

Retirement Line director of propositions Mark Ormston analysed product innovations including collective defined contribution schemes, deferred annuities, default retirement options and micro annuities.

Redington head of DC and financial wellbeing Jonathan Parker said the world is in a “different place” since the old age pensions bill was introduced in 1908, adding that DC is “now the norm”.

“The real-world implications of the ‘pension freedoms’ are now starting to be felt, leaving many members confused and potentially very vulnerable. If we are to help minimise the chances of people sleepwalking into poor outcomes in retirement, then they’re going to need more support.”

He said technology such as open finance and pensions dashboards can “revolutionise” how members interact with pensions, adding that the ‘in-retirement’ concept is “ripe for innovation”.

Read more @ProfessionalPensions

[Views]