1. Individuals are living longer post-retirement, which increases the complexity of the decisions they need to make to manage retirement resources effectively over a longer time period and the danger that people will deplete savings too early;
2. The shift to Defined Contribution (DC) funds requires retirees to make active decisions about what to do with accumulated DC funds instead of passively receiving pension income from Defined Benefit (DB) arrangements that used to dominate post-retirement; and
3. As a result of ageing populations in many countries, there are proportionally more older individuals and they collectively hold a larger amount of the economies’ wealth in retirement savings, investments and other assets, including housing wealth.
Private pension arrangements in which retirement income depends on contributions paid, investment returns, member charges and the way savings are accessed during retirement, such as in DC plans, are increasingly an integral part of most countries’ overall pension system. In some countries, they are now the main component of their pension system. The focus on the drawing down of pension assets is expected to increase as larger proportions of people in many countries move into retirement, and concerns increase with regard to poverty and inequality at older ages.
The variable work and life paths people are taking creates uncertainty; there is no longer a clear cut-off between work and retirement.
The UK Government’s decision to allow people flexibility about how and when to take their pension savings from the age of 55 compounds this uncertainty.
This study explores:
• How have other countries dealt with the management and drawing down of retirement resources?
and
• What can the UK learn?
It gathers and analyses evidence from a research group of eight countries: the US, Canada, Australia, New Zealand, the Netherlands, Denmark, Chile and Singapore.
This research group of countries, together with the UK, covers five of the seven countries with over one trillion US dollars of pensions assets. They are at various stages on the transition to DC pension systems. The group also includes other countries with strong pension systems and significant DC assets, and with different approaches to the management and drawing down of retirement resources.
PPI International C Decumulation Report
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