We’ve had lists of guidelines from the Regulator before but the 5 principles to support better retirement decisions are quite new. To summarise, they require

1. A “consumer”duty on a pension provider to take responsibility for how savings are spent
2. Fresh resource targeted at finding all savers and offering them help with decisions
3. Greater focus on investment solutions and how they work for those spending pots
4. Genuine choice for savers beyond investment pathways
5. Better support that gives people agency to take charge of their retirement finances

Principle one – All savers deserve value for money – Schemes should help savers to maximise the value of their pension savings into and throughout retirement

This is very radical. Right now employers do not see their job as having anything to do with maximising retired savers retirement income – infact they distance themselves from this , fearful they will be on the hook for outcomes. If an employer is to run its own scheme (as opposed to participating in a multi-employer workplace pension), it will have to have responsibility for the member’s experience, trustees will  be required to manage pre and post retirement options and liability for misfeasance will revert to sponsors. This will force employers to put up or shut up the promotion of their workplace pensions and this principle will drive most employers to consolidate. “Put up” may mean upgrading a scheme from DC to CDC – “shut up”, may mean hand handing the keys to a mastertrust. Very few employers will want to run their own DC schemes in future.

This principle (as decumulation is integrated into the VFM framework) becomes the equivalent of an employer’s consumer duty to its staff.

Principle two – All savers should be helped with decision-making – Savers should be encouraged and supported to make key decisions whilst saving for their pension, and in preparation for decumulation

The obligation to get to savers in their “retirement zone” is onerous. The onus is on the provider of the pension , and this will be enforced by the employer’s trustees, the master trustees or the IGCs and GAAs who oversee investment pathways of contract based workplace pensions.

The Regulator is saying that workplace pensions will become responsible for savers understanding the adequacy of their retirement savings (including state pension ). This extends way beyond any responsibility previously assumed and will undoubtedly require a pension dashboard to become a reality.

Orphaned savers can only be helped with decision making if they can be traced. This obligation is non-trivial, it is labour intensive and (if enforced) will substantially increase the cost of servicing a workplace pension.

Principle two has profound implications for the commercials of DC pension provision in the UK. 

Principle three – Schemes should put the saver at the heart of decumulation – Trustees should consider the best interests of savers and proactively help DC savers to mitigate the risks they face at and in retirement

By “risks”, TPR seems to be focussing on investment risks. Principle three is product focussed and is pointing to more attention being paid to the investment solution being used by those who retain their money in DC schemes through retirement.

Principle three is a challenge to the investment community to get its act together

Principle four – The market must innovate to provide genuine choice for savers – The saver should be given a choice in how to decumulate their pension savings considering their personal circumstances.

This will puzzle many in financial services who think that the investment pathway offer “genuine choice“. I don’t think TPR thinks they do.

Savers should be offered several pathways offering products which provide flexibility and more certain income streams and a combination of the two. Pathways which serve people throughout their retirement journey, the early and the later years. And consider people’s financial and family circumstances in the round.

This points beyond investment pathways to CDC pensions , even pensions offered by pension consolidators (reverse transfers as Edi Truell calls them). Here is the place for the flex and fix solution put forward by Steve Webb and LCP.

Principle four points to a more progressive approach to product innovation allowing savers to swap pots for pensions in new ways.

 Principle five – Schemes should provide wrap around and personalised support in the lead up to and during decumulation and in post-retirement

This relates to principle three and is only differentiated by timing. This principle points to pension scheme needing to know members much as advisers need to know their client

That might point to pathways which look at people’s financial circumstances in the round.

Here I see a call for the integration of financial advice into workplace pensions, something which has yet to be achieved. It will require a regulatory shift from both FCA and TPR as to where the advisory boundary lies and will undoubtedly excite those, like Tom McPhail, who believe it needs to be re-positioned to reduce the advice gap.

I see principle five having profound implications for guidance and advice, it is an admission that Pension Wise is not enough and that savers need

Support which is purposeful and leads to something. Giving people agency to navigate their options and to take decisions.

Where should the Delfas principles guide us?

Let’s remind ourselves of what they are

1. A consumer duty on a pension provider to take responsibility for how savings are spent
2. Fresh resource targeted at finding all savers and offering them help with decisions
3. Greater focus on investment solutions and how they work for those spending pots
4. Genuine choice for savers beyond investment pathways
5. Better support that gives people agency to take charge of their retirement finances

These principles should guide us to thinking of DC pots as lifetime pensions , with those who choose other strategies being supported too. There is clarity of vision here, clearly influenced by the Australian “purpose” debate.

We are getting on for a decade since the great disruption of Pension Freedoms, finally – having been knocked down for years, the Pension Regulator seems to be back on its feet.

DC – down but not out.