1. Countries with pensions freedoms that enables pensioners to spend their retirement savings as they wish is a ticking time bomb.
2. Longevity risk is not “well understood” and it has “significant implications” for retirement income.
3. Pensioners living above their life expectancy will cause a strain in the retirement system resulting in a "time-bomb"
4. The UK’s IFoA, the American Academy of Actuaries and the Actuaries Institute Australia joined forces to compare retirement income systems in their three countries and highlighted five principles.
IDENTIFIED PRINCIPLES
1. The five principles are adequacy, information, flexibility, equity and sustainability.
2. Responsibility for managing risk has moved onto the individual due to shifts in defined contribution schemes.
3. People need to understand and define individual's “adequate income”. Access to financial advice is vital.
4. Regulation should be flexible to reflect individuals’ different retirement needs and their “varying capacity to exercise choice”.
5. Governments and regulators should consider the impact of monetary policy on products that lock into the current interest rate environment.
6. Changes in the pensions market should focus on the longer term and not encourage “tinkering” with existing systems.
VIEWS ON THE OVERALL INDUSTRY
1. Individuals tend to underestimate how long they will live causing both individual financial hardship and an increased burden on the benefit system.
2. It is important to encourage people to save and make choices at retirement that can lead to a sustainable income.
Source: http://www.theactuary.com/
