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Centre for Policy on Ageing | |
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| Pension pots and how to survive them | | Author(s) | Les Mayhew, David Smith, Douglas Wright |
| Corporate Author | Faculty or Actuarial Science and Insurance, Cass Business School, City University London; International Longevity Centre UK - ILC-UK |
| Publisher | International Longevity Centre UK - ILC-UK, London, November 2015 |
| Pages | 30 pp |
| Source | ILC-UK, 11 Tufton Street, London SW1P 3QB. Download also available at: http://www.ilcuk.org.uk/index.php/publications/pub... |
| Keywords | Pensions ; Assets [elderly] ; Annuity schemes ; Preparation [retirement] ; Retirement policy ; Reports. |
| Annotation | In 2014, the UK Government announced proposals to allow people to withdraw money from their pension pot from age 55, subject to their marginal rate of income tax in that year. The main effect of this change is to remove the obligation to annuitise funds at any future age. This paper looks at how individuals can best use their pension pots, and argues that most people are better off drawing down, rather than annuitising. The authors review the likely effects of the new flexibilities on the decision to buy an annuity by aligning that decision to a person's retirement strategies. They deal with two types of longevity risk - which they call the selection effect and longevity drift - and the difference that these will make to future financial planning. They provide two worked examples of different draw-down strategies, to illustrate whether the risk that a retiree will run out of money can be avoided without buying an annuity. The report also considers the timing and bequeathing of wealth; the integration of housing wealth into retirement planning; and the question 'what if the pot does run dry?' It highlights the need for people to take advice; also that too many pension pots are far too small. While autoenrolment seems to have been successful in bringing more people into saving, the next challenge is how to get people to save adequately. The research finds that with careful management, moderate sized pension pots of £100,000 or more should not run out until at least the age of 80 or even older. Using a flexible rather than fixed drawdown approach can reduce the risk of running out still further. |
| Accession Number | CPA-151113001 B |
| Classmark | JJ: JD: JFM: GA: G5: 6K |
Data © Centre for Policy on Ageing |
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| ...from the Ageinfo database published by Centre for Policy on Ageing. |
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