Time for Retirement ‘SeLFIES’?

Abstract

To address the looming retirement crisis, many governments are introducing new pension programmes tied to employment for uncovered workers (NEST in the UK and Secure Choice in some US states). These attempt to improve access to pensions, and continue a trend of transferring responsibility for retirement security from governments and employers (via defined benefit [DB] plans) to the individual (via defined contribution [DC] plans), as neither governments nor companies are willing to bear the liabilities associated with pension obligations. This shift requires new thinking about how portfolios are managed and which instruments are available to investors. Our proposed SeLFIES (Standard of Living indexed, Forward-starting, Income-only Securities) make individuals self-reliant and are also advantageous for governments.

Keywords: Retirement SeLFIES, Pension REform, Financial Innovation, Forward Starting Bonds, DB Pensions, DC Pensions, Standard of Living Indexation