The OECD said individuals should use annuities to fund their retirement, at least partially, to protect themselves against longevity risk.
In its ’Pensions Outlook 2016’, the OECD argued that individuals should buy an annuity “not with all but at least some” of their retirement savings.
In the UK, the government introduced ‘pension freedoms’ in 2015 that ended the requirement for retirees to buy an annuity.
The report focuses on the increase in defined contribution pensions and the fact that these plans – which the OECD said needed simplifying – place funding risk on individuals.
Pablo Antolin, principal economist and head of the private pension unit, said: “To alleviate the pressure on individuals, the OECD advocates the use of financial advice and partial annuitisation which transfers the responsibility for managing longevity risk from individuals to professionals such as insurers.
“Governments need to ensure they support the development and regulation of these services so people have adequate access to them. In addition, we view financial education as an essential component on retirement policies.”
©2016 funds europe
