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Is there a place in the UK Defined Contribution pensions market for a guaranteed savings product?

Report of the Investment Products for Retirement Savings Working Party

Published online by Cambridge University Press:  18 June 2013

S. Eason ,
P. Barker ,
G. Foroughi ,
J. Harsant ,
D. Hunter ,
S. Jarvis ,
G. Jones ,
V. Knava ,
P. Murphy  and
K. Murray
...Show all authors
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Abstract

The UK has seen a significant transition from Defined Benefit (“DB”) to Defined Contribution (“DC”) for occupational pension saving. The planned automatic enrolment program starting in 2012 is expected to increase the use of DC. The main features of DC are that investment risk falls onto the individual during the pre-retirement phase and that there are no guarantees as to investment returns or the level of pension. In July 2012, Steve Webb, the Pensions Minister, challenged industry to think hard about meeting the need for more certainty about pension savings in DC plans and to consider providing an affordable ‘Money Safe’ guarantee where the member would get back at least the nominal value of their contributions (individual, employer and tax relief). This paper explores whether this is viable for the mass market.

Keywords

Defined Contribution (“DC”)Occupational Pension SchemesAutomatic enrolmentInvestment riskGuaranteeWants and needsValue for moneyLifestylingVolatility targetingExpected returnGuarantee chargesPortabilityConsolidationCommunication
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 18 , Issue 3 , September 2013 , pp. 624 - 656
Copyright
Copyright © Institute and Faculty of Actuaries 2013 

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