The 2015 pension liberalisations were welcome but people still need a safety net.
Michael Johnson, described by some at George Osborne’s pensions guru, first proposed the recent liberalisations in a paper published by the Centre for Policy Studies back in 2010 but is worried that sufficient safeguards have not been put in place. The government nudges people towards saving for their pension through tax incentives and most recent auto-enrolment but once you reach private pension age you’re on your own.
In his latest paper for the Centre for Policy Studies, Johnson proposed “auto-protection” at private pension age to protect against financial risks in later life. Auto-protection will have two key components: “auto-drawdown” at private pension age in the form of an income drawdown default of between 4% and 6% of pot assets, per annum and “auto-annuitisation” of residual pots, at age 80 which would facilitate the collective hedging of individuals’ exposure to the un-quantifiable risks of longevity.Read Full Report