Defined contribution (DC) pension schemes have tended to focus on the accumulation phase, implementing mechanisms such as auto-enrolment, contribution escalation, and default investment strategies to bolster member outcomes. But as members transition into retirement, this single focus is no longer suitable.
Retirees can face complex choices regarding investments and withdrawal rates, decisions for which they may be ill-prepared. This heightens the risk of incurring high fees, suboptimal investment returns, restricted access to savings, or, in the worst case, running out of money completely.
A whole-of-life retirement income default can offer members a single fund for life, seamlessly transitioning from saving to drawing an income. At retirement, members stay invested and simply switch on income payouts, while retaining full access to their savings in case their needs change. This ‘do-it-for-me' approach simplifies retirement planning and provides a regular, income that's managed to be sustainable.
A key whole-of-life feature is its managed pay-out process, designed to deliver a regular monthly income, similar to a defined benefit pension payout. Annual reviews adjust payouts to help long-term sustainability, while members can switch income payouts off (or modify income levels by changing their fund mix) and/or withdraw lump sums as needed. This versatile strategy balances regular and growing income with downside mitigation through a diversified portfolio, supporting retirees through every stage of later life.
Explore a smarter approach to retirement income with this exclusive interactive video, produced in partnership with AllianceBernstein.
