UK - Lifestyle defined contribution (DC) funds offer a practical alternative to the issue of compulsory annuitisation, Watson Wyatt has said.
Paul Macro, senior consultant at Watson Wyatt, said building DC schemes which took changing needs of savers into account throughout the lifecycle of the plan - by moving away from risky assets into less risky assets closer to retirement - could make the problem less severe.
Macro said: "It looks like yet another part of the rule book might be torn up in response to the current crisis. Some people would welcome the opportunity to avoid locking in their losses but you can never assume that the only way is up for the stock market. People who need the market to recover quickly could be playing a game of double or quits."
He added there was a "long term issue" to sort out, regardless of any short term solutions proposed.
"Not many people are affected by the 75 year rule now, but the figure will only rise as life expectancy improves. The State Pension Age will not remain fixed as life expectancy improves, so why should the age at which you must buy an annuity? However, if some people wanted reform so they could keep all of their money in equities until the last possible moment, the last few weeks might have made them think again," Macro said.
Andrew Roberts, partner, Barnett Waddingham, said he welcomed the Conservative proposal as it would allow greater flexibility for savers.
He said: "We believe that the current rules discriminate on the grounds of age. A suspension would mean that individuals could annuitise when it is right for them regardless of their age - although we would always advocate an investment strategy that minimises exposure to volatility as they approach retirement or annuity purchase."
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