I’m a fan of Joey’s message from TPR in advance of the PPI’s report on the defaults that should help savers in turn pots to pensions.

I’m a 64 year saver with a pot and no guided retirement yet. It is odd that DC providers are reckoning DC defaults could play “critical role” when none of them have offered retirement income for the rest of my life. There’s been no progress in the 12 years since annuities stopped being that default and nothing has emerged to replace them.

So I find this statement from the PPI overdue! We need guided retirement solutions whatever segment we find ourselves in.

Of course the idea of a scheme having a single default is far too simple for an area of retirement saving that thrives on complexity. Segmentation is a way of recognising the extraordinary complexity of retirement for people. Segmentation does not mean cutting members up (ouch!) but cutting up the scheme so that members are dealt with differently depending on their preference.

This will undoubtedly mean canvassing those approaching their retirement date about what matters to them. I look forward to getting a questionnaire from my DC providers to assess what kind of person I am. Or maybe there’s enough data about me , for them to make their mind up without asking me!

Undoubtedly their decision will be a series of “trade offs” between freedom and income with people falling somewhere between those who cash out their pot and those who buy an annuity. Or maybe I will be able to choose between a number of defaults – which doesn’t sound much like a “default” to me.

The PPI has produced a long report

Designing Guided Retirement Solutions ;Meeting Member Needs 

I quote from a smart piece of work by Professional Pensions collating the views of the PPI and of DC providers.

The PPI said guided retirement will need to operate in a “complex” environment in relation to the available information schemes can access and the diversity of member circumstances. Consequently, it said the solutions are not expected to be based on fully tailored approaches and will need to operate with partial information, which groups individuals into wide-ranging and data-informed categories.

I guess that “segmentation” is the same as grouping “individuals into wide ranging and data-informed categories“.

Presumably the PPI’s conclusion is that the one size fits all approach adopted historically by pensions is no longer appropriate. Martin Richmond of Professional Pensions tells us the PPI have recreated the pension as something that jams simplicity between flexibility and the ability to respond to changing circumstances over time.

It said the solutions will require “trade-offs” as while the Pension Schemes Act highlights the provision of a regular income, it does not stipulate the extent to which solutions should mitigate risks such as inflation, investment volatility, longevity or the extent to which schemes should guide member choice. It noted solutions will need to balance objectives including adequacy, income security, flexibility, simplicity and the ability to respond to changing circumstances over time.

It is true we haven’t seen what the Government will require of “guided retirement”. Whether we will see something that leans towards CDC or offers infinite choice. I am sure that somewhere in the middle is an answer which will meet with grudging approval from most though not all providers.

It seems that PPI prefer infinite choice to being told what to do

the report argued guided retirement will not function as a single one-off decision at the point of access, but as an ongoing “dynamic” pathway with implications for when the pathway begins, how it will change over time, and how members are provided with support to navigate economic shocks and reassess their retirement decisions.

What those of us who argue for retirement as a simple life uncluttered by decisions that are “nasty”, is not good news to the PPI or those quoted by Professional Pensions.

Here to finish off is Jonathan Watts-Lay explaining why we can’t get a pension without risk unless we employ someone to help us take decisions as we go on through those stress free days of leisure.

“Retirement decisions are complex and highly personal, and experience shows most people want support with this. A generic default pathway risks people sleepwalking into choices that don’t fit their circumstances or meet their needs, particularly as many retirees are likely to have multiple pension pots with varying amounts saved into each.

“The PPI’s research highlights how guided retirement can potentially improve outcomes; however, many members will need personal guidance to help them understand the options available and ensure they make an informed decision across all of their pensions. We have had a lot of interest shown in retirement guidance services as a means of helping individuals to understand their options prior to making any decision.

“This type of support, alongside digital services and tools, are likely to become best practice as guided retirement solutions are launched. Specialist workplace providers who can deliver tailored, high‑quality and robust retirement support at scale will be key to its success.”

Guided Retirement is going to be hard work , the nastiest hardest problem in finance may  still need to be taken by those struggling to do so.