TPR investigation into pre-retirement literature of trust-based DC schemes found 23% of retirees use available options
Almost 80% of defined contribution members fail to take up retirement choices available through the open market option (OMO), a report from The Pensions Regulator reveals.
The regulator’s investigation, which assessed the pre-retirement literature of 97 trust-based DC schemes, found just 23% of retirees used the OMO despite 98% of schemes offering it.
The report also showed 30% of schemes had alleged legislative breaches of retirement disclosure regulations and 57% had scope for improving the standards of the retirement information they send to members.
And some 6% were referred to TPR casework teams to follow up on substantial changes required to their retirement literature or processes.
TPR policy lead Warren Staley says: “We would like to see schemes do more to promote the OMO. It is a wake-up call to trustees to have a look at their retirement processes and see if they can be doing anything better.”
Standard Life head of pensions policy Andrew Tully adds: “It comes down to how it [OMO] is being communicated to members in a way they understand with as little jargon as possible, because they might not realise how important it is. It will be interesting to see what TPR does as a result to try and encourage trustees to improve in this.”
Staley says the regulator makes a judgement on whether further information is required and it is then a casework team steps in.
“They will have discussions with the trustees and understand whether it is a complete breakdown,” he says.
The report assessed the schemes’ literature in adherence with legislative requirements, good practice in areas such as the description and prominence of the OMO and the use of clear, plain English.
The regulator will send a letter to 4500 schemes highlighting the findings of the investigation and encouraging trustees to review the pre-retirement literature sent out to their members.
