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The PPI is an INDEPENDENT educational, not-for profit research institute. We undertake rigorous research from a neutral, long-term perspective

Reports and Briefing Notes

Retirement funding: analysis of retirement income patterns

From April 2015, as part of the Coalition Government’s ‘Freedom and Choice’ reforms, UK citizens aged 55 and over have been allowed to access money they have saved into their pension in whatever way they want. The deregulation of the decumulation phase comes with significant risks. Research by the Financial Conduct Authority (FCA) and others suggests that for many consumers an annuity is a good option. But take up of annuities is often lower than economic theory would lead to us to expect.

The Social Market Foundation (SMF) commissioned the PPI to undertake modelling of individuals to assess whether there were other options that improve retirement outcomes.It drew upon international case studies and applied these lessons to the UK, assessing the potential outcomes for consumers and the Exchequer, and what could be done to enable government and regulators to intervene in a timely manner and with the right people.

This PPI report summarises the methodology, assumptions and key findings from the modelling. It does not make recommendations as to the appropriate direction of future policy, but is designed to provide independent evidence to allow policy development to be well informed. Further results can be downloaded from the annexes below. 

Chapter one outlines the individuals and the different decumulation patterns that were modelled.

Chapter two explores the post-retirement income of an individual and how the rate at which it is withdrawn exhausts the the pot. It also outlines other sources of income such as the State Pension and means-tested benefits.

Chapter three considers how important each component of post-retirement income differs by total income level, home ownership and private pension income. It also explores the risks involved in the decumulation phase including longevity, economic performance, pot exhaustion and investment returns.

Chapter four explores the impact to the State of individuals decisions, and the potential need for means-tested benefits following pot exhaustion.  


To download annex one which contains the full results in the report, please click here.

To download annex two which contains the results in current earnings terms, please click here.

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