Chapter 3: ‘Supporting Savers to Make the Right Choice at Retirement for Them and Their Family and How to Build on the Lessons of Auto-Enrolment’
“We Need a National Narrative: Building a Consensus around Retirement Income”, Report of the Independent Review of Retirement Income, 2016
239 Pages Posted: 10 Jul 2020
Date Written: March 1, 2016
We will investigate whether it is possible to design a set of good decumulation defaults and default pathways at retirement which will be suitable for most savers, in the same way that a good default investment strategy in the accumulation phase can be designed. Even if this is possible, we accept that it is likely that more people might opt for a different retirement income plan than the estimated 10% of people who reject the default accumulation fund. For example, some retirees might be in poor health and so might choose to access their funds in full at the date of retirement – or over as short a period as possible (staggered to avoid paying unnecessary income tax). Given the complexities of retirement expenditure decision making, we will examine the support in terms of guidance, help and advice that savers need in order to make the right choices for them and their family. Building on the lessons of auto-enrolment, we will examine what nudges would be useful to move people towards making decisions that are in their best long-term interests. We will also consider the barriers, especially the regulatory barriers, to implementing a default. The overriding question that we seek to answer in this Chapter is this: Is it possible to design safe harbour retirement income plans which combine safe harbour products with financial help or guidance (that confirms the suitability of the product for the client) in order to provide retirement income journeys that are good enough for most of Middle Britain?
JEL Classification: G22
Suggested Citation: Suggested Citation