The U.K. Work and Pensions Committee proposed Thursday for the government-backed £2 billion ($2.8 billion) multiemployer defined contribution plan National Employment Savings Trust, London, to start to provide a default drawdown option for participants going into retirement.
The committee has asked the U.K. government to mandate that plan sponsors default participants into drawdown products starting in April 2019 in efforts to protect their savings and boost engagement efforts with these savings post-retirement.
In addition, every DC provider will be able to offer a default decumulation option starting in April 2019 that will be subject to a 0.75% charge cap, similar to accumulation products, according to the proposed changes.
"We want to expand that success story (of automatic enrollment) so that everyone, no matter how they are saving, has a simple, suitable, default pension option, with a low, capped fee. From that solid base, those who want to choose other options would retain complete freedom to do so," said Frank Field, chairman of the committee, in a news release.
NEST, which is not able to offer decumulation products at all in the present legislative framework, welcomed the proposal.
Gavin Perera-Betts, chief customer officer at NEST, said in an emailed comment in response to the proposal: "Our priority is to make sure that our participants are looked after when they reach retirement. Most of (them) want their savings to produce an income for life. Well-governed guided pathways can help achieve this goal by giving savers reassurance and security right through retirement, which is what they say they want."
"We'll continue working with government and industry to ensure our participants have fair access to the sustainable retirement income options they need," Mr. Perera-Betts added.
In addition, the committee proposed a single dashboard incorporating state, defined contribution and defined benefit pension accounts to be hosted by a specially appointed government body. The committee wants to eliminate multiple dashboards, which are currently provided by commercial firms.