IN CONVERSATION WITH Esther Hawley - Head of Retirement Proposition - Standard Life

We interview Esther to delve into the Decumulation conundrum.

Let's start at the beginning! What would you say are the key challenges to deliver innovation in DC decumulation?

I think the challenge that underpins a lot of the questions around decumulation is that there is no “right” answer here: there isn’t a product or investment solution that is going to be able to “fix” DC decumulation, if only we can work out what it is and how to build it.

Everyone has different priorities and expectations for their retirement, and so the advantages and disadvantages of any solution will measure up differently for each individual.

So for me the most immediate ask is not so much around what solutions we can develop, but more about how we can better match people up with the solutions that might suit them best.

Clearly advice plays a role in this, but in reality not everyone can or will take advice. High quality engagement and support tools are also important, so that we can empower as many people as possible to make good decisions for themselves. But again, not everyone will engage, and we also need to be able to cater for those who don’t.

This means we need a whole spectrum of decumulation support: we need advice, engagement, and non-advised options.

We need products and investment solutions designed for different cohorts of members (after all, you can only design really good investment solutions when you know the kinds of customer needs you are aiming to meet), and we need the right communications framing and narrative throughout the retirement savings journey to help people towards the options they need. It is a multi-faceted challenge - but if we can solve it then the benefits to DC savers will be considerable.

In your view, what changes are needed to deliver better decumulation solutions?

We set out in our recent paper “Avoid sleepwalking into retirement” some of the things that we at Standard Life would like to see change.

In particular, making advice easier to access is key. Personally, I’m a big supporter of both broadening access to regulated advice and the FCA’s proposals for developing ways of offering “targeted support” without providing regulated advice

But in my view most importantly of all we also need non-advised options and ways of guiding people towards “default” solutions or those who don’t take advice and are not actively engaged.

How are Standard Life approaching these challenges?

A key element of what we are doing is to start from the basics. So for example, while everyone will have different needs at retirement as I’ve outlined above, there are some common themes that will apply to most, if not all.

In particular, ensuring that you have enough guaranteed income to meet your essential spending needs is a sensible starting point for anyone planning their retirement.

Beyond that, having flexibility on what you spend over and above the essentials is also going to be attractive to most people.

So empowering people to explore a combination of guaranteed and flexible income is a great starting point to tackle the decumulation challenge, and lot of the work we are doing is centred around this concept.

One example of what we are developing is our Mixed Income Builder, which is a tool that we will be launching in the coming months.

This will allow people to work out how much guaranteed income they already have (from the State Pension and any defined benefit income), and explore how they can use their DC savings to top up their guaranteed income if needed, with the remainder available for spending more flexibly.

This will be a really impactful step towards simpler retirement decisions for our members.