With the continual move from defined contribution pension arrangements, combined with pension freedoms in the UK and increasing longevity, the need for individuals to optimise what they do with their pension savings has never been so great. Regulation aside, this also presents an opportunity for innovation and alternative ways of thinking about product design for providers.
These new pension products will be based on:
- an appropriate blend of risk-sharing between customers, with excess risk transferred to an insurer
- a focus on real income
- an investment universe that includes real, illiquid assets for investment over the long-term
- quantifying the trade-off between the performance and stability of pension income
- suitable dynamic econometric models
- incorporating investment market timing into the investment strategies.