Don’t leave retirement to luck

Consider all your sources of retirement income. For example, how much will your government provide? Then try to envision future costs. For corporate plan sponsors, it is crucial to consider why you are sponsoring a pension scheme.

Research points to the fact that more investment options in a savings plan lead to fewer participants. So whether you are a pension plan sponsor or member – know the pitfalls of human behavior.

This follows quite naturally from the previous point. Limited choice puts more pressure on the default option so the standard better be good. For example, a life-cycle fund or a managed account with an appropriate risk-return profile.

Inertia, the tendency to stick to the status quo, is a key obstacle to retirement saving. A pension scheme with an opt-out mechanism rather than an opt-in traceably increases savings.

Smart investment concepts begin with the end. The question how retirees receive their savings – in the form of a lump sum, annuity or drawdown – should guide how plan sponsors and savers define their target outcomes.