The 2014 UK Budget has introduced greater choice at retirement for members of a defined contribution (DC) scheme. However, the majority of DC investment default designs are based on the expectation that members will purchase an annuity at retirement, leading to increasing investment in bonds during the approach to retirement.
One of our clients in the financial services sector wanted to review their default strategy to determine whether it remained appropriate for their members in the post-Budget environment.
We offered the client our new proprietary tool, RetirementFit, which projects each member’s pension savings to retirement and estimates their risk tolerance using standard administration data and behavioural finance research. Following this analysis the Trustees will revise the objective of the default in the approach to retirement.