You are here

Defined Contribution Pensions

This policy briefing is part of the IFoA’s DC pensions campaign focusing on adequacy and longevity risk. It considers what factors can help minimise the risk of consumers’ pensions running out during retirement.

Can we help consumers avoid running out of money in retirement?

What you will get from this report:null

Our report, Can we help consumers avoid running out of money in retirement?, explores what rate of drawdown is likely to be sustainable and compares this against full annuitisation, and then combinations of drawdown and annuitisation. It addresses and answers the following questions:

  • What are the most important factors to consider in order to minimise the risk of consumers’ pensions running out during retirement?
  • How could a combination of drawdown and annuitisation affect consumer outcomes?


Consumers are increasingly accessing their DC pension pots, opting for drawdown products rather than annuities, and an increasingly large number of those consumers are purchasing drawdown products without regulated financial advice. As drawdown products do not offer a guarantee, it increases the risk of consumers running out of money in retirement.


What are the most important factors to consider?

The two main factors to help provide a sustainable income are the age consumers start drawdown and the rate they withdrew their savings.

  • A consumer who enters drawdown at age 65 has a high likelihood of generating sustainable income if they withdraw 3.5% per annum, or equivalent to £3,500 from a £100,000 pot.
  • Comparatively, a consumer at age 65 could expect to receive around 4.5-5.5% of their pot per annum from an annuity as the annuity provider can pool risk among its consumers. This would be equivalent to £4,500 or £5,500 per annum.
  • If an individual starts drawdown at age 55, then the sustainable level of annual income reduces from 3.5 - 3.0%, or equivalent to £3,000 from £3,500.
  • The investment strategy of a consumers’ pension will affect their income sustainability and the range of outcomes. The difference between a balanced and either a cautious or  adventurous investment strategy could be equivalent to 4 years’ worth income.

How combining drawdown and annuitisation could affect consumer outcomes?

A combination of annuities and drawdown enables consumers to balance flexible access vs guaranteed incomes. It can also lead to higher overall income.

  • 9 out of 10 consumers taking £3,500 per annum via drawdown from age 65 to 75 could then expect to be able to buy a level annuity of more than £3,500 per annum at age 75.

When deciding what combination of drawdown and annuitisation would be best meet their circumstances consumers need to consider a range of questions including:

  • How much risk would I like to take?
  • What is my current health status?
  • How much income do I need in retirement?

Contact Details

For further information on any of our public affairs or policy work please contact us on:

Related documents

Filter or search events

Start date
E.g., 22/09/2021
End date
E.g., 22/09/2021

Events calendar

  • Spaces available

    A panel discussion with investment representatives discussing the impact of investment on climate change and vice versa.

    This event is part of The Road to Glasgow: IFoA’s Sustainability Thought Leadership Series which will provide a platform for prominent contributors so that our members and others can understand the perspectives of a wide range of parties interested in the climate debate.

  • Spaces available

    Climate change is one of the greatest risks facing our world today. Addressing it will require multi-faceted solutions. Through this panel session, we will explore the different levers that can be used to meet net-zero targets including climate science and data, government engagement, and mobilising green finance.

  • Spaces available

    How governments and societies collectively respond to the climate crisis is increasingly being analysed through the lens of intergenerational fairness. Our expert panel will assess and explore the extent to which inter-generous fairness is being considered in climate policies, the lessons from those countries who are leading the way on fairness and justice in climate interventions, and more.

  • The Growth Mindset for Actuaries

    13 October 2021 - 8 December 2021

    Spaces available

    This practical course is aimed at actuaries at any stage of their career who want to develop their own growth mindset and apply it to their work setting and personal or professional lifelong learning. The content of the course builds on the lecture given by Dr Helen Wright on Growth Mindset as part of the President’s 2021 Lecture series, and will be delivered over a period of 2 months, from mid-October to early December.

  • Spaces available

    The climate crisis and the degradation of our planet will affect societies everywhere. How we address these threats will require solutions that transcend borders. As a global profession, the actuarial community is well-placed to consider and propose effective risk management solutions to help manage the climate crisis.