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Pension Decumulation Pathways – a proposed approach

Author

Listed:
  • Hyams, S. D.
  • Davies, H. R.
  • Findlater, A. J. M.
  • Gilbert, A.
  • Hollister, K.
  • Kiely, F.
  • Jablonski, T. J.
  • Squirrell, C. M.
  • Warren, O. H.

Abstract

Decumulation Pathways are proposed to help achieve better retirement outcomes for those with Defined Contribution (DC) pensions. The DC fund is split into two parts, in proportions of the consumer’s choice. Most is allocated to the Pension Fund to provide a lifetime income, while the rest is placed in the Flexible Fund for flexible access and/or to leave as a legacy. The Flexible Fund is invested in flexi-access drawdown. The Pension Fund is invested in a guaranteed annuity, Collective Defined Contribution, or a Pooled Pension Fund which maintains individual DC funds but pools longevity risk between participants. An illustrative standard Decumulation Pathway is intended as a default solution, or can be tailored by the consumer. It uses the Pooled Pension Fund, an automated withdrawal strategy which ensures a lifetime income is provided and one that aims to increase in line with inflation, and a moderate risk investment strategy. The standard approach is evaluated using various metrics, indicating that it has as a strong chance of providing a higher income than could be obtained from an annuity or drawdown, with limited downside risk.

Suggested Citation

  • Hyams, S. D. & Davies, H. R. & Findlater, A. J. M. & Gilbert, A. & Hollister, K. & Kiely, F. & Jablonski, T. J. & Squirrell, C. M. & Warren, O. H., 2022. "Pension Decumulation Pathways – a proposed approach," British Actuarial Journal, Cambridge University Press, vol. 27, pages 1-1, January.
    • Handle: RePEc:cup:bracjl:v:27:y:2022:i::p:-_16
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