Income, security and wellbeing: helping savers choose a good retirement

Document type
Discussion paper
Lloyd, James
Strategic Society Centre
Date of publication
14 July 2015
Older Adults, Poverty Alleviation Welfare Benefits and Financial Inclusion
Social welfare
Material type

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The changes to rules on Defined Contribution (DC) pension savings implemented in April 2015 allow individuals to withdraw as much of their DC pension savings as they wish from the age of 55, paying only their marginal rate of income tax on withdrawals. If many people opt to cash-in their DC savings rather than receive a guaranteed retirement income – behaviour observable in similar systems overseas – this may result in many UK retirees having higher levels of cash savings and investments during retirement, but lower guaranteed retirement incomes. It would be reasonable to expect that a lower level of guaranteed retirement income could have a range of effects on people’s experience of retirement, in particular, their wellbeing. To explore these issues, the Strategic Society Centre undertook quantitative research entitled Income Security and a Good Retirement. On the basis of the findings of this research, a number of recommendations are made to policymakers:

  • Actively promote receipt of a guaranteed income in pension policy to improve the wellbeing of retirees.
  •  Educate savers before retirement about the role of guaranteed income for a good retirement.
  • Include information about the importance of guaranteed income to wellbeing in retirement in Pension Wise guidance and information.
  • Ensure receipt of a decent, guaranteed retirement income is the default option for DC pension savers.
  • Undertake regular research into the effect of the April 2015 changes on older people’s wellbeing.