The Association of British Insurers (ABI) has released a new report with a five point plan aimed at engaging consumers with their retirement options far earlier in their life than is currently the case. Three years on from the dawn of pension flexibility reforms, the ABI is stepping up efforts to ensure that consumers are getting the best out of their retirement. The report is fuelled by concerns that over half of fully withdrawn pension pots are not spent, but are moved into other savings and investments which could mean consumers are paying too much tax, whilst missing out on compound investment growth.
Retirement decisions are complex and consumers need help to understand their options, identify goals for retirement and how to achieve them. The ABI’s five point plan promotes active consumer engagement – empowering consumers to make their own, well-informed decisions through improved communications and use of guidance. At the core of the guidance are recommendations for tailored and phased customer communications throughout a saver’s life, a mid-life MOT, methods of prompting more people to use guidance, making the retirement risk warnings fit for purpose and finally introducing improvements to communications once someone has retired.
Pension freedoms were designed to put more power into the hands of consumers, but this flexibility also increased the complexity and risks that consumers face. The ABI’s recommendations are for interventions that will transform the way people interact with their pension pots and help people navigate their choices. They are calling on a number of stakeholders to help the industry to deliver the practical steps needed to make these interventions happen.