A Solution to a Key Challenge in the UK Retirement Market: HMT Should Issue Selfies

Abstract

There is a looming retirement crisis in the UK as the country faces the challenge of an aging population. The challenge is that many individuals are not financially educated and yet, they are now being asked to take responsibility for complex financial decisions: How much to save, how to invest, and how to decumulate one’s portfolio at retirement? A recent innovation in Brazil, the creation of the RendA+ (or “Extra Income”) bond, issued through their Treasury Direct facility, is a very effective instrument that might serve as a model for the UK to adopt/adapt. This bond was designed along the lines of the “SELFIES” (Standard-of-Living, Forward-starting, Income-only Securities) first proposed in 2015. SELFIES is a single, liquid, low-cost, low-risk (government-issued) instrument, potentially purchased in slices as small as ₤5 at a time, and easy-to-understand for even the most financially unsophisticated individual, because it embeds accumulation, decumulation, compounding and inflation-adjustments.

Keywords: SeLFIES, Defined Contribution, UK Pensions, His Majesty's Treasury, Retirement Security, Financial Innovation