Smarter Scheme Design In a Drawdown Environment

Size: px

Start display at page:

Download "Smarter Scheme Design In a Drawdown Environment"

Nicholas Webster
5 years ago
Views:

1 Smarter Scheme Design In a Drawdown Environment Claire Finn 12 th April 2016

2 The New World Retirement Utopia

3 Tools to retirement The journey to get there Single Landing Point Multiple Landing Points

4 How many people are annuitizing? % of Assets [VALUE] % [VALUE] % 3.2bn has been encashed 4.2bn have has been invested in income drawdown 3.3bn Has been invested in annuity products [VALUE] % On BlackRock s DC Platform Nearly 1 in every 4 is flowing into drawdown products Source: ABI Pension Freedom Statistics: One Year On, 2015 Note: excludes drawdown withdrawals data, treated separately. For professional clients / qualified investors only RSM-3753

5 Annuity Hedge - How Practical? 25% Returns on a portfolio tracking annuity returns 20% 15% 12 month return 10% 5% 0% % Source: BlackRock DC Pre-Retirement Benchmark

6 The Trowel One Size Fits All Considerations: What is the right landing point? Maximising diversification Focus on flexible and all-weather components Allocation 100% 90% 80% 70% 60% 50%? 40% 30% 20% 10% 0% Age Source: BlackRock. For illustrative purposes only.

7 The Fork A new tool Considerations: Landing Point Decision the default, default Contract Based is there power to make the change? Target Date Solution which one, which target? Profiling different defaults for different cohorts? 1. Targeting drawdown 2. Targeting Annuity 3. Targeting Cash Source: BlackRock. For illustrative purposes only.

8 Case Study

9 BlackRock s Approach Identical asset allocation until 10 years to retirement Flexi Retirement drawdown Retirement Pre-Retirement Fund Capital Cash Fund 100% Allocation 80% 60% 40% 20% 40% Equity Annuity Hedge Cash 0% Years to Retirement Years to Retirement Years to Retirement Global equities Global small cap equities Global real estate Commodities UK bonds Overseas bonds Pre-retirement fund Cash Source: BlackRock. For illustrative purposes only. 9

10 Decumulation: where can investment products help? An investment product can seek to directly address market risk An investment product can seek to directly address inflation risk Market Risk Inflation Risk An investment product cannot explicitly address longevity risk Longevity Risk Behavioural Risk An investment product can act to mitigate these risks through the investor s experience FOR PROFESSIONAL CLIENTS / QUALIFIED INVESTORS ONLY 10

11 Key Takeaways 1 Should 2 If 3 Investment your scheme be a trowel or a fork? you are a trowel, it may seem simple but lots to consider products can solve some, not all, retirement challenges Source: BlackRock. For illustrative purposes only.

12 Disclaimer This material is for distribution to Professional Clients (as defined by the FCA Rules) only and should not be relied upon by any other persons. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: Registered in England No For your protection telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. Aquila: Issued by BlackRock Life Limited ( BLL ), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. The Fund described in this document is available only to trustees and members of pension schemes registered under Part IV of the Finance Act 2004 via an insurance policy which would be issued either by BLL, or by another insurer of such business. BLL s registered office is 12 Throgmorton Avenue, London, EC2N 2DL, England, Tel +44 (0) Registered in England and Wales number BlackRock is a trading name of BLL. Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, BUILD ON BLACKROCK, SO WHAT DO I DO WITH MY MONEY and the stylized i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

Big Data 2.0 The future of quantitative investing

Big Data 2.0 The future of quantitative investing Raffaele Savi Co Head, Scientific Active Equity October 2016 I spent the last several years answering these questions What s the big deal about big data,