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., 29/06/2022
End date
E.g., 29/06/2022

Events calendar

  • Spaces available

    There is a lack of publicly available information covering the practices insurers employ to manage their exposure to reinsurance recapture risk. A working party was set-up to shed light on the different approaches insurers use to mitigate this complicated to manage risk. This report is intended to form part of a publicly available information repository that market practitioners can refer to and reflect on as best practice evolves and develops.

  • Spaces available

    The Actuaries’ Carbon Collaboration (ACC) is a group of actuaries and other professionals working towards a coherent understanding of the issues around greenhouse gas (GHG) emissions by considering them in an actuarial context.

    Emissions into and absorption from the atmosphere can be modelled in the same way that we model variable cash flows, including the impacts of uncertain quantities and timing. The ACC’s work investigates both the insights that this analogy provides and its limitations.

  • Spaces available

    This talk presents the work of the Data and Modelling workstream of the IFoA Mental Health Working Party. We explore data and modelling considerations in the risk assessment and underwriting of mental health conditions. We will also consider how newer risk factors and improved data availability might open up opportunities for additional underwriting and product designs.

  • Pensions Dashboards

    12 July 2022

    Spaces available

    As the industry prepares for Pensions Dashboards, we have lined up a specialist panel who is at the heart of the ongoing work in this area. Hear the latest developments, future proposals and have the opportunity to put forward your questions to our speakers.

  • Spaces available

    Artificial Intelligence is heralded as a game-changer to the ways industries use data, with the insurance industry especially looking to embrace these new technologies. This brings many questions – not least around data privacy, ethics, potential biases and so on – with regulators increasingly interested in developments.

    Moreover, whilst the stunning progress of specific technologies such as Watson and Alphazero made headlines some years ago, current commercial applications of AI remain far from mature.

  • Spaces available

    This webinar will cover:

    • Some background on the risks of misselling in an ESG context, including the DWS case

    • Achieving positive impact is a strong antidote to the risks of greenwashing or ESG misselling, however this risks having a tension with fiduciary responsibilities

    • This tension can be resolved with a concept called Universal Ownership

    • Under Universal ownership, investors have an appetite to make a loss in order to achieve positive impact, and yet still have no compromise on their fiduciary responsibilities

  • Spaces available

    This session will focus on the transformation roadmap of the healthcare sector in KSA and the role of actuarial capabilities in enhancing its evolution to the desired end stage as per the objectives of the Vision 2030. The discussion will focus how the system has evolved so far and shed light on  the expected future changes. Through examining  the transformation, we will highlight how the sector is and can use actuarial  expertise to not only assist with this transformation but also use basic actuarial principles to identify the key risks and their respective mitigation strategies.

  • Spaces available

    The purpose of this research paper is to explore enterprise risk management lessons which can be learnt from the Covid-19 pandemic in preparation for potential future pandemics as well as other “gray rhino” or “black swan” events. This paper is not intended to be an all-encompassing solution to the issues presented by Covid-19; rather, the content has been provided to help drive discussions regarding how risk management processes may need to evolve in line with the dynamic nature of the underlying risks that they sometimes need to capture.

  • Spaces available

    The IFoA's Infrastructure Working Party, led by Chris Lewin, will present its new introductory guide to infrastructure investment, which will be published on the IFoA web-site prior to the webinar.   Those readers whose institutions have already taken the plunge into infrastructure will know that it is a highly complex and diverse field of activity.   This guide does not explore all the matters which investors take into account, but it does discuss many of the more important points, including the risks and past returns, benchmarking, and ESG and SDG considerations.    Attendees will be invi

  • Spaces available

    Health contributes to happiness at the personal, family, community and societal level.  Health, importantly underpins all our economic security. This talk will explore the drivers of our health, the measurement of health and the steps we can take to improve health – most of which lie outside the NHS.