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NAPF conference: U.K. DC plan design should look to U.S. model

Mark Fawcett

The U.K. defined contribution plan market should look to the U.S. for inspiration to keep participants safe when upcoming retirement freedom changes kick in, said senior people in the money management and pension industries.

“I think we are at a point where we need U.S.-style safe-harbor principles,” said Tim Banks, managing director, pension strategies group at AllianceBernstein (AB), at the National Association of Pension Funds annual investment conference in Edinburgh on Friday. “That is not to be prescriptive about the products out in front of people, but surely we can all sign up to good principles, enshrine (it) in legislation, and get all stakeholders (including money managers and participants) signed up to that so we can move forward with confidence.”

Mr. Banks was speaking on a panel discussing the future of strategies available to DC participants who no longer will be required to purchase an annuity to provide income for retirement.

“We still see a very big role for annuities … maybe not in the traditional form or the traditional time they have been bought,” Mr. Banks added.

Also on the panel was Mark Fawcett, chief investment officer at the National Employment Savings Trust, London. He likened the DC market post-April 6, when the changes take effect, to “crossing a bridge with no handrails.”

Mr. Fawcett presented the option of long-life insurance, or deferred annuities, which could start at age 80 or 85.

“In the U.S., people are already beginning to design default drawdown (strategies that are) followed by later-life protection,” Mr. Fawcett said.