The value of open collective arrangements

There are a string of comments on my recent blogs suggesting that 7% would be a sensible conversion rate for DC pots defaulting to retirement income.

But Pensions Oldie sees potential problems of making promises without protecting you from people leaving the pension half way through the pension payment, I think he is thinking of Nest but may have his mind on other “DC pensions” which are drawdown till fixing later in life with an annuity. The conc.ern is the drawdown phase when all money due can be taken out to a bank account

This is the blog in question “expectations of pay from pension funds”.

Pension Oldie draws on his age to remind us that stability is not always available in pensions. We may have more money coming out than going in

I queried

The voice of someone who knows that people may run from pensions , that inputs may not match outputs…

Here is the First Actuarial graphic showing how difficult it is when schemes have to soldier on without new money coming in. Pensions which are not paid collectively will of course have no way of benefiting from the open scheme sweet spot.

This is the worry for Nest which may be considered 14m personal pensions rather than one collective pension scheme.

To me this is a strong argument for collective pensions and to the lock in that we see on them. The argument about the dangers of flexibility in retirement has only just begun. Thanks to the Oldie.