Re-framing ‘The Annuity Problem’: Can we afford retirement?

This paper seeks to widen the debate about the annuity problem, arguing that whether or not annuities offer a bad deal is not the crucial issue. No adequate solution for the gilt supply crisis (a key factor in determining annuity rates) is in sight, but nor is any present alternative means of drawing income in retirement likely to solve the problem, except for a few. As the trend towards DC pensions continues, a compulsory purchase annuity (CPA) purchased with the average DC fund comes nowhere near matching even the miserly basic state pension. Urging individuals alone to save more, when the vast majority have no hope of attaining anywhere near a ‘full’ pension, is often at best whistling in the wind. Substantial employer contributions are also required.