While we ponder the accumulation strategy, have we really thought through what happens when the default funds reach their target date?
But this presupposes that
1. there is capacity to absorb the huge sums into keenly – priced annuities,
2. that individuals will be able to chose sensibly the right type of annuity to protect their retirement income
3. that there will be advice to hand to secure best rates via the open market option.
DB trustees know only too well, that the easy bit is going up, it’s when you are on your way down and the money on its way out that it gets tough.
If you were trustee of a £2bn pension scheme (the size of a NEST default at the target date), would you tell your 100,000 members to “go buy an annuity”?
Perhaps these target date funds should be targeting death not retirement?
NEST is due to open its doors in less than 6 months. There has, till now, been very little debate on how NEST will manage the pensions in payment of its membership.
- Prudential UK Enters Into Buy-in Agreement With GlaxoSmithKline (prnewswire.com)
- The workplace pension changes that affect you (confused.com)
- Retire like you’ve got a pension (theglobeandmail.com)
- Will This Help You Retire Rich? (fool.com)
- Annuities keep women afloat in retirement (theglobeandmail.com)