This comment is from an “outsider looking in” on this blog. The thought is very personal and explains why some who would have drawn down from a DC pot may prefer to be paid a CDC pension.
I could chose to select my DC investments to match those of a CDC scheme’s asset allocation and if I did that at the same cost, I could enjoy the same benefit. I might even set the allocation for a little more growth and beat the CDC income.
But, and here’s the rub, I don’t know how long I will live.
I might feel under confident about choosing my investments but not want (or afford) professional help. I might well then be more cautious, trying to ensure the funds are there when needed just in case I live an extremely long time, being worried about withdrawals being unluckily timed and balancing that with enjoying life whilst I can. My DC would then likely under perform CDC, whether I chose to try to go it alone or bought the guarantee and annuity provides.
I hope to make it to a ripe old age with my faculties reasonably intact. Genetics, family history, demographic factors, and my efforts to control my diet and fitness give me some cause for optimism, but the number 20 bus might wipe that aspiration out tomorrow. If you want to make God laugh tell her your plans.
Someone wealthier might be more concerned about preserving wealth for the next generation, be happy to pay the fees of an adviser or take great interest in the investments, and best meet their goals with DC. Someone poorer would perhaps be more concerned about having absolute guarantees needing to know that their basic needs are definitely covered. Like many people, I’m in the middle.
I’d like to leave something to my kids, and I have some other resources and secure income already, so CDC could potentially give me the opportunity to use some of my pension funds to ensure I would never run out of money whilst having a better income than DC would provide.