Partner Interactive Video: Why offer a whole-of-life retirement income default?
http://www.professionalpensions.com/sponsored/45…— Henry Tapper (@henrytapper.bsky.social) June 21, 2025 at 7:37 AM
I’m interested in this argument from Alliance Bernstein though I’m not sure it provides the security that John Hamilton wants for Stagecoach staff “100% security, 100% investment”.
The video is introduced by a lady with an American accent who speaks as if in AI but what follows by a smart chap from Alliance Bernstein who talks us through the “risk budget” maximalising the return for savers in retirement. Ageing, deglobalisation and climate change reduce returns that mean that we need more than bonds to get us through retirement. I think the population have cottoned on to this, they have said no to annuities and want to be invested in growth rather than de-risking into lending.
Alliance Bernstein’s answer to the problems people have with getting a “smoothed journey” into the later stages of life (ending in death). But what are Alliance Bernstein up to that makes savers wanting an “income for life” from their savings?
The video involves a lot of disclaimers every minute or so making it virtually unwatchable. Which is disappointing as I have always found Alliance Bernstein innovative. Our old friends at AB surely have more than a collective drawdown, so I soldiered through the disclaimers till we get to the meat. If you persevere you can get to the end of the video (I am told) but I had to revert to the transcript to discover that “senior retirees” should their needs require it, buy an annuity which will see them through.
I have to say that offering us a float and fix solution is not very thrilling to me – a 63 year old wanting to have a pension. Michael Mainelli recently called the DC pension the biggest lie in finance and for this very reason, that DC decumulation requires bailing out into annuities at a point when you think your needs require it.
Now this is fine for those who are on top of their finances and know their way around decision making but I thought the point of defaults was that they were for people who didn’t want to take decisions but wanted a pension? Was I wrong?
It is not good enough for me to poke my finger at Alliance Bernstein who have supporters in the float and fix camp – the like of Steve Webb and LCP. But I think there are better ways for funds to pay till people die and become “pension funds”.
It is possible for funds to have sponsorship not from employers who previously had to backstop longevity a protection from a pension through investment. I am afraid there are very few employers who can do that these days even if they club together as USS and LGPS enable employers to do. What is becoming an alternative to an employer is a “capital buffer” that can stand resiliently so that pensions are at least 99% likely to pay out (with the PPF picking up the bill for the 1% who fail).
This is equivalent to risk levels with insurers (despite the latter being referred to as “gold plated”) and since such capital backed pensions can invest in growth assets, over time they will provide better returns than annuity funding. For that reason business plans for commercially organised capital backed pension plans show that they can pay more than 10% better returns with the chance of Christmas Bonuses on top (in good years).
The great thing for organisations like Alliance Bernstein who want to get more into pension investment , is that capital backed pension plans can offer people pensions from their DC pots. LGPS offer an opportunity to swap pots for pensions already and there is no reason why default accumulation funds cannot do the same – becoming “pension funds” – heaven forbid!!!
I hope that David Hutchins and colleagues are interested in new approaches that employ asset managers like Alliance Bernstein but don’t require savers to work out when to transfer to annuities late in life.
