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Key points

  • Ensure trustees give defined contribution (DC) scheme members the option of selecting a retirement product (eg an annuity) from an insurance company of their choice.
  • Make sure trustees set up a process that enables them to communicate information about choosing the most appropriate retirement options.
  • Ensure trustees provide members with access to an adviser or annuity broker, or they give them information to make their own decisions.

Providing support to members

If you are an independent financial adviser (IFA) or annuity broker, trustees may ask you to help members make decisions at retirement. You should liaise with the trustees or employer as necessary.

In accordance with Financial Conduct Authority rules, you must confirm and agree the costs with the member before you conduct investment business.

Providing support to trustees

Open market option

Make sure that members are made aware of the open market option at least four months before their expected retirement date. This means giving members the option of selecting an annuity from an insurance company of their choice and one other than they saved with.

Retirement process

Work with trustees to set up a retirement process that helps members to receive a good outcome from their pension savings. The process should ensure you start communicating with members a number of years before they retire. Make sure trustees consider:

  • deferred and active members
  • members with small and large pots
  • members with multiple pots
  • members choosing to retire at different ages, including those retiring in difficult circumstances, such as ill health.

The process should set out the key activities, timeframes and who is responsible for them. It could include the following stages:

  1. ensure the member understands retirement
  2. ensure the member understands the different ways to take retirement income
  3. ensure the member understands how to buy products
  4. implement member’s decisions
  5. review the retirement process and monitor outcomes.

Make sure the process enables you or the trustees to act without delay and that members purchasing annuities on the open market are made aware they need to act promptly to avoid missing out on the best rates.

Types of support

To support scheme members at retirement you could either provide access to an IFA or annuity broker, or provide information so that members can make their own decisions.

You may wish to refer members to information from organisations such as the Money Advice Service or the Pensions Advisory Service to help them make their decisions.

Your pension: it’s time to choose is a useful guide from the Money Advice Service for DC scheme members who are close to retiring and have a pension pot to convert into retirement income.

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