The Pension Regulator (TPR) has urged smaller defined contribution (DC) schemes to provide decumulation products or consolidate, in the interests of savers.
TPR said millions of DC members now have access to in-scheme retirement options, signalling a shift from a savings system to a pensions system.
Ahead of the introduction of the guided retirement duty in the Pension Schemes Bill, TPR analysis found that larger pension funds are leading the way in supporting members at retirement, with 13.4 million members now offered drawdown at the point of retirement.
The analysis showed 86% of schemes with more than 5,000 members offer at least one retirement income option, compared with just 46% of small schemes, with fewer than 100 members.
It also showed that two-fifths of all schemes provide no decumulation products at all. Meanwhile, 43% of members – represented by 16% of schemes – can now access drawdown without leaving their scheme.
TPR said the expansion of in-scheme drawdown is largely driven by the growth of master trusts, which have the scale and governance to make it feasible.
Joey Patel, director of policy at TPR, said: “These findings herald a transformation in the DC workplace pensions landscape ahead of guided retirement duty, with millions of savers now able to access in-scheme retirement options.”
However, Patel added that too many members in smaller schemes are left without support.
He said: “We urge trustees to start getting ready for the Pensions Schemes Bill by reviewing their offer and starting to design their decumulation products.
“If you are not able to guide savers into the right retirement options for them, our message is clear: you should consider consolidation into a scheme that can offer value for money solutions.”
