Majority of savers want automatic pension payments at retirement

Three quarters of defined contribution (DC) savers over the age of 55 have said they would find it “helpful” if their DC scheme automatically paid them a pension when they reached retirement, according to new research.

A paper from longevity risk management experts Hymans Robertson, Designing decumulation defaults – remember the member, argues that too many members are at risk of poor outcomes through lost opportunities, expensive mistakes and fundamental confusion. It says this is not acceptable and that a default decumulation model is an essential safety net, with flexibility to meet the needs of different members.

The paper suggests designers should identify what data they are using, what assumptions are made and how they may change over time. It also says that they should know their members and what member needs their solution is aiming to meet, now and in the future. And they should set their default design objectives and be clear on what a good member outcome will look like as well as applying a risk lens and conducting scenario analysis and member testing.

The paper comes as research from Standard Life shows around 14% of retired people aged over 55 have returned to work due to insufficient pensions. Income issues were cited as the main reason for two-thirds of over-55s returning to work, with a third unretiring due to higher than expected living costs. The research also found that 24% of retirees found their pensions were not sufficient to live off. Men were more likely to return to work than women, with 16% of men aged over 55 returning to work compared to 12% of women. Other reasons for unretiring included boredom at home.

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