The foundation argued that the UK Government should create a two-tier early warning system using data from other countries to understand what retirees are doing with their pension savings and to identify emerging long-term risks both to consumers and the taxpayer.
It recommended:
- A retirement risk dashboard to help the UK Government monitor retirement decisions. It would be based on a range of statistics such as pension balances, pension cash withdrawal, insurance take-up, levels of investment risks, and take-up of guidance and advice.
- Personal pension alerts to help policymakers intervene where appropriate with the groups it has identified as at particularly high risk. Potential interventions could include: targeted support and advice and initiatives to make retirees think twice before making one-off decisions.
Default paths
The think tank also pointed to examples of when governments have intervened to try to calm concerns about retirees spending their savings too quickly.
One example included Australia recently accepted a proposal that would set a preselected default option to ensure retirees have a stable income stream.
It also highlighted the South African Government’s recent decision to set maximum annual withdrawal rates for default drawdown products, on the basis that the complexity of existing options means many pensioners get a poor deal.
Other default options included consumers being told what the ‘normal’ withdrawal rate is, or the government making it a statutory duty for providers to monitor the suitability of default option for individuals, and to inform consumers where they face unsuitable risks.
