The Nest blueprint is what we need for pensions

Cash, income and a guarantee - retirees can ask for nothing more

Piggy bank and birds nest with golden egg, studio shot

Retirees want it all; access to their pension cash, a retirement income, and a guarantee on income in later life. And now they might be able to have it if they're willing to wait three years.

Government-backed pension scheme, the National Employment Savings Trust (Nest), has set out a blueprint for a default drawdown product that it could provide to its members who don't know what to do with their pension cash in retirement.

The details that have been released so far are very promising: roughly speaking at retirement, 90% of your savings would be invested in drawdown to create an income, 10% would be accessible as cash and part of the income would be used to pay into an annuity that would kick in at age 85 to provide a guaranteed income for the rest of your life.

It's exactly what retirees want – the chance to get their hands on a bit of their money as well as a steady retirement income, and Nest believes it might be up and running in about three years.

Engagement problems

Unfortunately three years may be a bit late for some people and you have to ask yourself why the government, when deciding pension freedoms, didn't consult with organisations like Nest to try and get initiatives like this off the ground earlier.

The make-up of our pension landscape is something of a shambles. Auto-enrolment and employers make sure we never have to think about our pensions; we are enrolled, our contributions set and our investments chosen. Thanks very much – just let me know when I can retire!

But when we get to retirement age we're expected to engage with the pensions industry and make what is possibly one of the most important financial decisions of our lives, one that will decide whether we can live a life of comfort or penury in our old age.

Insulating people from pensions in their working lives and expecting them to engage at age 65 (or probably age 70 in my case) is nonsensical and exactly why Nest's default is so important.

It will be interesting to see whether any insurers will follow Nest's lead and put forward their own blueprint. Having messed up pensions and annuities for years, it will be a wonder if all retirees won't seek solace in Nest's revolutionary idea – and who can blame them.

Read more:
Pensions: what to expect after the election
Pensions: four changes to look out for
Can't get cash from your pension? Stop moaning

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