|
The use of lifestyle
default funds in DC schemes has already eased the problems that
current compulsory annuitisation reviews are aiming to address,
according to Watson Wyatt.
The financial consultant’s 2008 Pension Plan Design Survey
found that more than 90 per cent of workplace defined contribution
(DC) pension schemes have a default fund, and more than 90 per cent
of these involve the concept of lifestyling. This allows members’
investments to be substituted for less risky asset classes as the
member approaches retirement, which has left many people shielded
from the current financial crisis.
“Good pension scheme design has made the problem that the
politicians are seeking to address much smaller by ensuring that
many people are not vulnerable to huge stock market swings when
retirement is just around the corner,” commented Paul Macro,
a Watson Wyatt senior consultant.
Responding to a proposition by the Conservative Party to temporarily
relax the rules surrounding the purchase of annuities at age 75,
Marco said it looked like “another part of the rule book”
would be torn up in response to the current crisis.
“Some people would welcome the opportunity to avoid locking
in their losses but you can never assume that the only way is up
for the stock market,” he warned. “People who need the
market to recover quickly could be playing a game of double or quits.”
The Conservative Party’s proposals would affect those at age
75 and those who are planning to take a tax-free lump sum at retirement.
The age of the mandatory purchase of annuities is set for review
by the House of Lords, with a view to increase it from 75 to 85
years old.
“Whatever the response to the short-term crisis, there is
a long-term issue to sort out,” Macro concluded.
- Pensions Age
October 2008
|
