Tue 17 May 2022 - At retirement, it has become very popular for those with Defined Contribution (DC) pensions to choose drawdown rather than an annuity, but drawing a sustainable lifetime income in this way is an impossible challenge for most people. We consider a Decumulation Pathway for the typical consumer, where a small part of the DC fund is set aside for any flexible access and legacy requirements. The bulk is then used to provide a lifetime income, utilising the pooling or insuring of longevity risk. We compare how this performs against drawdown and an annuity and consider how such products might be introduced.
Mark Woodruff FIA is a Managing Partner at Bromiley & Partners Wealth Management and a Chartered Financial Planner.
Stephen Hyams FIA is chair of the Pension Decumulation Pathways Working Party. He has 40 years of experience in pensions, much of it at a major consultancy where he provided actuarial advice to trustees and employers of all sizes up to FTSE 100, and across both defined benefit and defined contribution (DC) schemes. More recently he has focussed on the challenges faced by consumers in managing their DC arrangements, and he chaired the Working Party whose paper on ‘rules of thumb’ formed the basis of the IFoA’s policy briefing, ‘Savings Goals for Retirement.
Oliver Warren, FIA is a member of the Pension Decumulation Pathways Working Party. He is based in the Netherlands and works as an Investment Solutions Consultant at a global asset manager, helping develop advanced and practical solutions for institutional investors across a wide range of regulatory frameworks with a particular interest in defined contribution solutions. Prior to this, Oliver was an investment consultant at a large consultancy in the UK for over 8 years.