Pension systems must embed retirement income choices from the start, says Festina Finance

Pension systems that focus on the retirement income decision from the start are better at giving members steady outcomes, according to Festina Finance. 

International research, including work by the TIAA Institute, found clear lessons for policymakers and trustees that could be used in the UK.

Dan McLaughlin (pictured), UK country head at Festina Finance, said: “The common thread internationally is that the retirement income decision is not treated as an afterthought. 

“When it is embedded from the outset, supported by clear defaults and robust governance, schemes make it significantly easier for members to secure more sustainable income for life. 

“Countries such as Switzerland and Chile demonstrate that integrating income options directly into the member journey, through occupational plans or standardised national marketplaces, can increase engagement without mandating any particular choice.”

McLaughlin added: “International evidence also highlights the benefits of adjustable or variable income arrangements, where payments can move within transparent rules linked to funding or longevity. 

“These designs preserve the principle of lifetime income while improving long-term sustainability, which is particularly relevant to UK discussions around collective defined contribution (CDC) schemes. 

“The retirement income decision does not need to lock members into fixed payouts.”