The Future of DC Incomes: Annuities, drawdown and the default path

Annuities, drawdown and the default path
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Date(s) - 15/05/2014
4:30 pm - 6:30 pm

Strategic Society Centre

A public debate on the historic change to UK pensions policy in Budget 2014, and what it means for the incomes of ‘defined contribution’ pension savers. Speakers at this event include:

  • Chris Curry, Director, Pensions Policy Institute
  • Carl Emmerson, Deputy Director, Institute for Fiscal Studies
  • Dr Yvonne Braun, Head of Savings, Retirement and Social Care, Association of British Insurers
  • James Lloyd, Director, Strategic Society Centre
  • Chair: Norma Cohen, Demography Correspondent, Financial Times

Twitter hashtag: #DCincomes

The ‘annuities deal’ – tax-favoured pension savings must be used to provide a secure pension income – has provided the foundation stone of UK pension policy since the Finance Act of 1921. However, by removing punitive tax charges for cashing in ‘defined contribution’ (DC) pension savings that policed the annuities deal, Budget 2014 effectively scrapped this framework to the surprise of the pensions industry and other stakeholders. Historians will only judge this major reform to UK pensions policy a success if the average retirement incomes of DC savers increase as a result of the change. But, to achieve this outcome, there remain significant questions around appropriate financial products for different wealth and older-age groups, the financial capability of the older population, and the effectiveness of policy levers available to government – such as information and ‘guidance’ – to ensure positive outcomes for savers. This event will therefore take stock of this landmark change to UK pension policy, and explore:

  • Retirement incomes – will the average retirement incomes of DC savers be higher or lower as a result of the Budget 2014 changes?
  • ‘Default path’ – if automatic conversion of DC savings into an annuity remains the default option for retirees, will the Budget changes actually have any significant impact on individual outcomes? What should be the default path for DC retirees?
  • Financial capability – behind talk of ‘responsibility’ and ‘trusting individuals’, what does research suggest about the financial capability of the older population to optimise their retirement incomes? Do savers hold consistent attitudes toward annuities? Will optional, free financial ‘guidance’ for DC savers be adequate?

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