The panel would prevent small pension pots being stranded, according to Pada, as providers would be obligated to offer an annuity to all members with savings worth more than the trivial commutation limit, currently £2000.
To make this work, Pada says it is working to reduce costs for both providers and members by streamlining business processes. Members will likely enter their details onto the personal accounts website and choose an annuity from search results by pressing a button.
Scheme members will also be made aware of the open market option and alternatives to annuities such as income drawdown. But Pada believes a lifetime annuity will be the preferred option for the vast majority, particularly in the early years of the scheme.
Pada chief executive Tim Jones says: “We are trying to reduce costs on both sides to make the economics of a £2,500 annuity work. If we can automate some of the business processes to reduce costs we can change the economics of providing for small pots. This is our way of achieving zero stranded pots.”
William Burrows Annuities director Billy Burrows says: “This is a positive idea but the industry has to make sure these people are getting good rates. There has been a lot of activity around keeping the costs of saving in a personal account down but the Government needs to ensure that when these people come to retirement they are getting good value for money.”
The panel is part of a decumulation consultation launched this week. Pada will publish a summary of responses in the summer after the consultation closes in March.