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Optimising Future Pension Plans: Phase II

Phase two of this ARC commissioned research programme led by Dr Catherine Donnelly (Heriot-Watt University) seeks to develop innovative new pension product designs that keep the customers' needs at the forefront and provide a stable income in retirement, whilst minimising costs for the customer.

The products currently available to provide a stable, lifetime retirement income are not meeting the needs of many people. Working closely with industry, this two-year programme aims to address many of the questions around longevity risk-sharing in the retirement space. It will create and share practicable worked examples of how to structure these products.  For example, how can the benefits be calculated, for how long can they provide a stable income and what guarantees are appropriate.

The programme will also study collective defined contribution (CDC) pension plans.  The enactment of the Pension Schemes Act 2021 is the first step in allowing CDC plans like the proposed Royal Mail CDC plan in the UK.  The programme will quantify the benefits of collective risk-sharing in such plans under a range of scenarios.

Visit phase 1 of the programme

This exciting research programme will play a key role in delivering better retirement outcomes for members.

The options currently available to access retirement savings are limited and require extreme choices to be made. Many employers and providers want to offer genuine alternatives, but there is some uncertainty about these new arrangements and how they will deliver on their objectives. The independence and rigour of this research will provide answers to the big questions, and help to move the policy debate forwards.

Steve Hitchiner

Steering Group Chair


Programme objectives

  • Analyse collective risk-sharing in pooled annuity funds and collective defined contribution (CDC) plans and determine where the risk is shared among the customers or plan membership.
  • Determine how to structure the benefits, based on given criteria.
  • Determine the trade-off between these risks and the stability of pension income, in both pooled annuity funds and CDC plans.
  • Study the addition of guarantees in pooled annuity funds and CDC plans, to enable them to better meet their objectives.

Follow this project on social media with the hashtag #ARCfuturepensions


 

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