BW contribute to global research on DC pension savings

We have contributed to a global study of Defined Contribution (DC) pensions to shed light on what the UK can learn from other countries’ approaches to accessing DC savings, in order to enable good outcomes for UK retirees.

Published by the Pensions Policy Institute (PPI), the research focusses on the global shift of workplace schemes to DC arrangements, and the new and complex responsibilities being placed on individuals to make decisions about how best to use their accumulated pension and other retirement assets.  

This project analyses evidence from countries around the world, including: 

• USA
• Canada
• Australia
• New Zealand
• Netherlands
• Denmark
• Chile
• Singapore

Daniela Silcock, Head of Policy Research at the PPI said “While the UK pension flexibilities resulted in stakeholder concerns that pensioners may overspend their DC savings, retirees in the USA, Australia and New Zealand are often reluctant to spend down savings, to the point that in the USA, the majority of retired people retain at least 80% of their savings around 20 years into retirement.”

“Interestingly, especially in light of the UK’s journey to fewer restrictions on pensions access, minimum withdrawal requirements (seen in the USA and Australia) ensure that people access at least some of their savings and provide themselves with a retirement income.  However, any type of compulsion is often unpopular with pensioners and may be difficult to implement in the UK after restrictions were so recently lifted.”

Paul Leandro, Partner at BW, said: "The fundamental problem is that people will either not retire with enough or that they’ll be too reluctant to use their retirement pot to lock in guaranteed income. We are at risk of falling into the Australian and US traps of treating it purely as a pension as a savings pot, rather than a pot to pay a retirement income. But, as the PPI report reveals, the US approach of forcing minimum drawdown rate from age 73 has neither been a success nor popular."
 
"A more accessible and data-led solution is necessary – one that enables and encourages people to make informed decisions, while giving them access to the right level of support and products that optimise retirement income. The key lies in creating a robust regulatory environment which properly supports and encourages innovation across the pension industry. This is achievable, but it does require regulators work hand-in-glove with the industry."

"Siloing product development will hobble progress and only hurt savers in the long-term. An effective ecosystem of products and services is needed to enable people to optimise retirement income."

The Pensions Regulator, Columbia Threadneedle Investments, LGIM and Standard Life also contributed to the research.