As baby boomers enter the de-accumulation phase, they need better choices to protect against longevity risk—and policy reform could help, says a report released today by the C.D. Howe Institute.
The report, Annuities and Your Nest Egg: Reforms to Promote Optimal Annuitization of Retirement Capital, calls for policy reforms to “level the playing field for annuity products and promote market-driven variety of choice, thus ensuring retirees have at least some funds available to them for the long haul.”
Policy changes could do this by integrating insurance, banking, pension and tax regulations so that these are neutral factors in the consumer’s decision to annuitize. Other reforms should enhance the ability of private annuity sellers to offer a range of de-accumulation products and promote consumer education.
In the study, University of Calgary’s Norma Nielson, who is chair of insurance and risk management at the Haskayne School of Business, provides a comprehensive look at annuity markets in Canada and abroad, and explores ways to improve Canada’s current system of law and regulation.
Among her findings are the following:
- few Canadians without a DB plan choose to annuitize even a portion of their lump-sum savings in retirement; and
- people in the lowest income brackets already receive most of their retirement income from government sources (which are a form of annuity), but most middle-to-high income earners would benefit from placing a portion of their private savings into a life annuity product.
