Standard Life is partnering with the Organisation for Economic Co-operation and Development (OECD) in a major new joint research initiative to develop new thinking on retirement income and supporting the needs of a diverse workforce.
The three-year deal will see OECD researchers and policy experts review global best practice on addressing the challenges associated with achieving financial security and explore potential new retirement income products. New at-retirement products could be launched by the end of this year, says Standard Life.
The OECD will also carry out an in-depth study of how factors such gender, culture, ethnicity and socio-economic background influence savings attitudes and behaviours and of the solutions that can support providers and employers in boosting engagement with all scheme members and customers.
Speaking to Corporate Adviser, Andy Curran, chief executive of Standard Life said: “We are a large insurance company with a large balance sheet with 13 million customers. It makes sense to us, given our expertise, to put the expense of longevity, saving and investment together in a way that packages that up.
“Was the problem with annuities that they were bought too soon? The consumer wants to have a level of certainty of income in retirement. And then they think about how they invest the balance. I would be hopeful that bay the end of this calendar year, or Q1 of next year that we will be able to bring solutions to market.”
Pablo Antolin, principal economist at the Private Pension Unit of the OECD said: “The idea of having an annuity bought at the end is there already. In the US they will use private pensions, the 401ks, at the beginning of retirement because social security will cover longevity risk. Here in the UK the public pension has a much smaller role than in other countries – even lower than in the US. So the need for more innovative ideas is greater, more necessary here, because the public pension is very, very minimal.
“To address the main challenges that ageing societies present for retirement, we need to understand the different views and concerns of the different stakeholders in the world of pensions and retirement. This joint research initiative brings the views and concerns of a key player to the fore and will help us in our role of providing policy guidelines to policy makers worldwide.”
Curran said around a third of the 15 million people between 50 and 65 have policies with Phoenix Group and Standard Life.
Curran added: “Our aim through the JRI is to foster innovation in the way we meet the diverse needs and wants of savers. By incorporating further research on gender, ethnicity, culture and socio-economic factors the OECD will help us shorten the time it takes to enhance our propositions, taking account of the latest international thinking. This initiative forms part of Standard Life’s wider commitment to invest in our brand and complements the work I announced last week to close the ‘guidance gap’.”
Discussing the potential for new decumulation structures, Jessica Mosher, policy analyst at the Private Pension Unit of the OECD said: “Collective DC as it is known here, or what we call non-guaranteed lifetime income arrangements, has the potential to overcome a lot of the challenges that we’re seeing in relating to retirement income, in particular, the adequacy problem that comes with low interest rates. So if we can free up some of that investment to invest in and not just bonds that can also increase retirement income adequacy.
“The biggest challenges I’m seeing in the market is implementation – a lot of countries are currently struggling with this, even those with established CDCs are struggling and finding specific problems. So in the Dutch case it is intergenerational risk sharing, although there are ways to do it without that.”
She added that Germany had four years ago passed legislation facilitating occupational DC solutions like the UK’s Royal Mail scheme, yet a lack of buy-in and agreement amongst stakeholders had meant take-up had been minimal.
Stéphanie Payet, policy analyst in the OECD’s Private Pensions Unit will lead the initiative’s research on diversity.
The OECD will discuss elements of the research findings over the next three years and will publish them in future editions of the OECD’s Pensions Outlook. Standard Life will use the findings to support clients and policy makers both in the UK and other markets, and says it ultimately hopes to be able to incorporate findings from the initiative into its proposition development.
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