Pensions - Articles - Comment on Government pension plans

David Brooks, Head of Policy at Broadstone, commented: “One of the less successful aspects of pension freedoms has been the implicit assumption that individuals can manage investment risk, sequencing risk and longevity risk throughout retirement. In reality, many people do not want to spend decades deciding how much to withdraw, how much investment risk to take, or whether their savings will last. There is therefore a strong case for retirement solutions that place more of these decisions in the hands of trustees and other professional managers.

 

“In that context, RCDC is an attractive addition to the retirement landscape. By pooling investment and longevity risks, it has the potential to provide a higher income than an annuity while still delivering an income for life. Members retain the freedom to opt out or transfer elsewhere, but those who do nothing are not left carrying the full burden of retirement decision-making.

 

“RCDC could also fit naturally within the emerging concept of guided retirement, occupying the space between individual drawdown and annuities. It offers a managed income for life without requiring members to lock into an insurance contract, while reducing the need for ongoing decisions about investment strategy and withdrawal rates. For trustees designing retirement pathways, that may prove particularly appealing, as it avoids the difficult question of when, if ever, members should be moved from drawdown into guaranteed income.”