Government-supported social retirement plans (Pillar I) are under extreme financial pressure due increased life expectancies and low fertility rates. Individuals are compelled to provide for themselves a suitable retirement through occupational pensions (Pillar II) and personal savings (Pillar III). The insurance industry can help as it is the only industry that accepts longevity risk as a core business, and is a long-term provider of lifetime annuities—an insurance that a person will not outlive their retirement savings.
Our new report examines the advantages of annuitisation of Pillar II schemes to ensure individuals do not outlive their retirement income. It suggests that some level of mandatory annuitisation, plus automatic enrolment into a Pillar II scheme, and automatic escalation of contributions, as means to ensure sufficient income throughout retirement.