UK - Default options for defined contribution (DC) schemes need to be re-examined to offer the best investment opportunities to avoid a potentially disastrous retirement problem, according to Watson Wyatt.
The company said this posed a significant threat which could "jeopardise literally millions of people's retirement income."
Roger Urwin, global head, investment consulting, Watson Wyatt, said: "Default options can have a number of benefits if well designed. However, if poorly designed and poorly communicated, individuals can find themselves with an entirely unsuitable asset allocation that reduces the chances of benefiting from investment returns"
Watson Wyatt estimated total DC plan assets to overtake defined benefit (DB) scheme assets by 2014 if current growth rates continued.
Research by Watson Wyatt showed global DC assets to be worth in excess of US$11trn, accounting for over 40% of global pension fund assets.
The need for effective investment options was highlighted by Mercer's recently published Q1 DC Universe Summary. The report showed losses in all equity markets in early 2008, with the S&P 500 Index alone down 9.4%.
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