Actuaries optimistic on pension guarantees

The Institute and Faculty of Actuaries has released a research paper showing how modern investment techniques could pave the way for guaranteed pensions.

Earlier this year, Pensions Minister, Steve Webb, announced that he wanted pension providers to come up with schemes that offer a “Money-back” guarantee that would mean workers got back at least what they paid in to their pension pots.

Industry experts were cautious, saying that the provision would be prohibitive, either as an initial cost or in dampening returns.

However, research by actuaries suggests that a well-designed guarantee need not be cost prohibitive nor unduly dampen returns.

The Institute’s spokesman, Scott Eason, explains: “A number of investment techniques already exist in the UK pensions market that with the right engineering would be suitable for this purpose, including life-styling and volatility targeting.”

He adds: “We conclude that a full “Money-back” guarantee may not be practical but that a guaranteed product to protect a built-up pension pot as individuals near retirement could be an attractive and affordable option.”

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Category: Insurance News