Pension 20 year money back guarantee

Reading this brief report on defined contribution (money purchase) provision in Europe, I had a little smile when I read the comment:

‘Surveys suggest that DC scheme members do not fully understand the risks in

retirement. If they are to enjoy the maximum benefits commensurate with the risks that they are prepared to accept, it is important that they are better informed about these risks and the characteristics of different products. Without this, they risk making inappropriate irreversible decisions which they may later regret.’

Personally, I’d have put that at the beginning of the document rather than as the penultimate paragraph. But I did like what appears to be an ideal money purchase ‘product design’ list:

‘For most people it would be desirable that a product has the following features:

protection against outliving pension capital
ability to capture higher investment returns during (part of) the decumulation phase
potential for increasing payments
stabilization of income payments
downside protection, for example a guaranteed minimum retirement income
a “money back” feature such as, for example, a guaranteed 20 year payment period
co-ordination between the different phases such as the transition from accumulation to decumulation and at the end of a guaranteed payment period.’

An interesting list, and one that I’d imagine will appear on a few product providers desks over the next few months, if it's not there already. See:

Avoiding pitfalls in retirement: a report on Defined Contribution pensions (GCAE)

(7 pages)

GCAE website