U.K. regulator delays new decumulation options

The introduction of new decumulation investment strategies has been delayed by the U.K. financial regulator amid the coronavirus disruption.

Defined contribution providers were set to introduce new decumulation strategies aimed at participants looking to draw down their retirement pots to the U.K. market starting Aug. 1. The strategies — known as investment pathways — aim to give defined contribution plan participants a wider choice of decumulation options at retirement.

However, the implementation of pathways was delayed six months by the Financial Conduct Authority Tuesday; the agency cited market disruption caused by the coronavirus pandemic.

The new options — one for participants ready to receive an income and one for those who want to continue to be invested during their retirement until a later time — are in addition to lump sums and annuities. They are aimed at participants selecting drawdown without advice.

DC providers should take the time to discuss the implications of changing decumulation strategy under the current circumstances with participants instead, the FCA said.

"It will be far better for consumers if the launch is at time that enables providers to put in place strong systems and products as they offer the pathways," said Paul Waters, head of strategic digital solutions at consultant Hymans Robertson, in an emailed comment.

"Otherwise, there will be a rush to meet the deadline and they will simply deliver a very basic product to ensure compliance. The delay will give providers time to really strengthen the investment proposition that sits behind each pathway," Mr. Waters said.

The new rules will also require firms to send annual information on fees paid by participants to access their retirement accounts.