GLOBAL - Traditional retirement frameworks do not consider the scheme portfolio's ability to generate sustainable income levels, an investment adviser has claimed.
He added: "Our research found these approaches also do not consider one of the major risks that investors face during retirement, which is longevity."
In contrast, Chen said the solution could be an approach which combines asset allocation with product allocation.
He said: "We need to combine asset allocation with additional instruments which protect investors against the market risk during the last period of time before retirement and against longevity."
These could be outcome-based products such as annuities, principal protected products and structured notes.
He claimed this approach would provide a "new retirement income efficient frontier", which is more effective for tradeoffs on retirement income than traditional approaches.
However, he concluded such products were not immune from a number of caveats. He said retirees could be faced with the risk of default by the insurance company providing outcome-base products.
In addition, he said investors with shorter retirement period might not benefit as this approach could not be cost-efficient.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.