The Work and Pensions Committee said that while automatic enrolment has been a “tremendous success” by defaulting people into pension saving, in the decumulation phase, when people receive their pension, people must actively choose what to do with their savings.
The committee said pensions can seem “distant and daunting. Faced with bewildering complexity, many people simply switch off,” adding that many were not shopping around and did not understand their options for investing their savings.
Its pension freedoms report said: “We recommend every pension provider offering drawdown is required, by April 2019, to offer a default decumulation pathway suitable for their core customer group.”
The same charge cap that applies to automatic enrolment schemes, 0.75%, should apply to default drawdown products, the report said.
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It continued: “People would still be free to choose to invest and spend their own money as they wished. But if they did not make an active choice, they would move into a suitable and regulated default product.”
The report said Government-backed pension scheme Nest, which was set up to support auto-enrolment, should be allowed to provide decumulation products from April 2019, including a new default drawdown pathway.
The report said evidence from automatic enrolment suggests Nest may drive better retirement outcomes by forcing other providers to offer greater value or risk savers switching over to Nest to get a better retirement deal.
The committee also said there should be a single pensions dashboard, where people can see all their pension pots in one place, in place by April 2019.
It said the multiple pensions dashboards being planned, “hosted by self-interested providers”, would only “add complexity to a problem crying out for simplicity”.
“Rather than regulating the dashboards into consistency, it is far simpler just to have one. The case for a publicly hosted pensions dashboard is clear-cut. Consumers want simple, impartial, and trustworthy information.”