Caveat Venditor: The brave new world of auto-enrolment should be governed by the principle of seller not buyer beware

Abstract

This report analyses the DC default funds used for auto-enrollment from two main perspectives. The first is qualitative and considers the impact of the behavioral traits of sellers (the providers, consultants and advisors that determine the fund design and the supply and distribution chain) and buyers (employers and trustees on behalf of the employees auto-enrolled). The second is a quantitative analysis of the impact of charges and asset allocations on the size of pension outcomes in different default funds. A number of existing and new schemes are modeled using appropriately calibrated stochastic simulation models.

JEL Classification: G22