U.K. Australia U.S. - Health | Hewitt Retirement Investment 3 U.S. Guest Speaker Kevin Hanney United Technologies Corporation Guest speakers Australia Guest Speaker Ian Lorimer

Download U.K. Australia U.S. - Health |   Hewitt Retirement  Investment 3 U.S. Guest Speaker Kevin Hanney United Technologies Corporation Guest speakers Australia Guest Speaker Ian Lorimer

Post on 24-May-2018

214 views

Category:

Documents

2 download

Embed Size (px)

TRANSCRIPT

  • Aon HewittRetirement & Investment

    Session #116 May 2016 San Francisco 19:00 / New York 22:0017 May 2016 London 03:00 / Beijing 10:00 / Sydney 12:00

    Session #2San Francisco 0:30 / New York 03:30 / London 08:30 / Beijing 15:30 / Sydney 17:30

    Session #3May 17, 2016 San Francisco 12:00PM (Noon) / New York 3:00PM / London 8:00PMMay 18, 2016 Beijing 3:00AM / Sydney 5:00AM

  • Aon HewittRetirement & Investment

    2

    Todays speakers

    How to ask questions during the webinar

    ChairAlison Borland

    alison.borland@aonhewitt.com

    U.K. Kevin Wesbroom

    kevin.wesbroom@aonhewitt.com

    AustraliaJenny Dean

    jenny.dean@aonhewitt.com

    U.S.Steve Shepherd

    steve.shepherd@aonhewitt.com

  • Aon HewittRetirement & Investment

    3

    U.S. Guest SpeakerKevin Hanney

    United Technologies Corporation

    Guest speakers

    Australia Guest SpeakerIan Lorimer

    UniSuper

    U.K. Guest SpeakerMark Fawcett

    NEST

  • Aon HewittRetirement & Investment

    4

    Agenda

    Decumulation Global Overview Market factors making Decumulation more challenging A range of options and approaches across the globe

    Decumulation in the U.K. A changing landscape Integrated savings solutions

    Decumulation in Australia Welcome to CIPRs The role of advice

    Decumulation in the U.S. Lower savings increase the challenge Employees and employers faced with a myriad of options

    Guest Speakers Kevin Hanney, United Technologies Corporation Ian Lorimer, UniSuper Mark Fawcett, NEST

    Key learnings for global plan sponsorsQ&A with guest speakers

    1

    2

    6

    5

    4

    3

  • Aon HewittRetirement & Investment

    5

    ChairAlison Borlandalison.borland@aonhewitt.com

    Decumulation A Global Overview

  • Aon HewittRetirement & Investment

    6

    Past and recent market factors have presented increased challenges

    Bond yields have been falling for more than 20 years.

    The amount outstanding of bonds trading with negative yields reached $6.9 Trillion as of April 2016.

    Source: ECB, J.P. Morgan.

    Source: Bloomberg, Datastream

  • Aon HewittRetirement & Investment

    7

    future returns and longer lives are making the problem worse.

    Source: McKinsey Global Institute: Diminishing returns: Why Investors may need to lower their expectations

    10

    12

    14

    16

    18

    20

    22

    1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

    Male life expectancy at age 65 by country, 1960-2050

    Australia Canada France

    Japan UK US

    Source: Historical data on life expectancy OECD Health database 1960-95. Recent data and projections of life expectancy Future based on the United Nations Population Division database, World Population Prospects The 2008 Revision.

    Compared to the last 30 years, real returns in global equities and bonds over the next 20 years are predicted to be materially lower

    while life expectancies in many countries continues to climb, creating the need for pension dollars to stretch even further.

  • Aon HewittRetirement & Investment

    8

    The perfect decumulation solution?

    What features would a retirement solution need to have?

    Consistent pre-and post-retirement investment

    strategy

    Economies of scale

    Clear, engaging and flexible

    Encourages regular member

    engagement

    Available to all fund sizes

    Easy to implement and

    monitor

    Investments

    Range of investment options and

    target outcomes

    Costs

    Institutional not retail costs

    Member Experience

    Range of tools and support

    Administration

    Seamless transition from accumulation

    Coverage

    Suitable for a range of legacy situations and requirements

    Implementation

    Little/no additional cost

    Income

    Some level of guaranteed or certain income

    Buckets for growth and spending

    Inflation protection

    Lifetime advice available

    Multi-channel communicationTax efficient

    Flexibility in times of need

    Integrated with other savings

    and state benefits

    Integrated with long term care,

    disability benefits, aged

    care

    Source: Aon DC Global Community

  • Aon HewittRetirement & Investment

    9

    Retirement expectations are changing what do members want?

    How members want to spend their retirement income, compared to how they need to spend their retirement income

    Source: UK Aon Hewitt survey with Cass Business School

    Will take money as soon as possible

    Early spender10%

    Continue to invest and dip in as

    and when

    Flexibility foremost15%

    Continue to invest to generate

    stable income

    Steady Spender35%

    Set aside for long-term

    care or bequest

    Residual Required5%

    Secure guaranteed income via an annuity

    Certainty-Seeker35%

    Years in retirement

    Expe

    ctat

    ion

    and

    inco

    me

    sour

    ces

    Travel

    Repay mortgage

    State Pension

    Base Pension

    Tax

    free

    cas

    h

    Part time work

    Help children / grandchildren

    Care costs

    Travel

  • Aon HewittRetirement & Investment

    10

    Each country is coming up with different solutions schemes

    Country Lifetime Annuities Income Drawdown Lump Sums

    Australia Allowed, but very little demand Allowed. Main options are account-based income streams Allowed and relatively common

    New Zealand Allowed, but there are no annuity providers in New Zealand Allowed Allowed and relatively common

    U.S. Allowed, but demand is weak. 9% of retirees have significant annuity income Allowed Allowed

    Canada Allowed, with significant demand Allowed, although with restrictionsin some cases Limited for DC pension schemes

    IrelandRequired, unless income can be shown to the above threshold to qualify for income drawdown

    Allowed given sufficient incomeRestricted to 25% or 1.5 timesincome as tax-free lump sum (taken by most people)

    Switzerland Default option, and subsidised Not allowed Allowed, but discouraged

    Denmark Unlimited deferred annuities Restricted amounts can be allocated to term annuities Allowed

    Netherlands Mandatory Not Allowed Not Allowed

    Singapore Mandatory Not Allowed Not Allowed

    Chile Default Option Restricted to programmed withdrawals Not Allowed

    U.K. Formerly primary option. AllowedCurrently restricted to capped drawdown and flexible drawdown products.

    25% tax-free, taken by most people. Expected policy is for whole pot to be available, taxed at marginal income tax rates after 25% tax-free allowance

    Source: UK Financial Conduct Authority: The Retirement Income market comparative global research

  • Aon HewittRetirement & Investment

    11

    U.K.Kevin Wesbroomkevin.wesbroom@aonhewitt.com

    Decumulation in the U.K.Navigating a shifting landscape

  • Aon HewittRetirement & Investment

    12

    George Osborne pensions surprise merchant

    Base Annuity Income

    Drawdown IncomeLater Life (Deferred)

    Annuity

    Drawdown Income

    Combined drawdown and annuity strategies may offer optimal at retirement options

    100 years of compulsory annuity purchase blown away at a stroke

    Let them buy Lamborghinis Give them 40 minutes of guidance

    (not advice) And now (2016) 500 of tax free

    pensions advice

    Source: Evalue

  • Aon HewittRetirement & Investment

    13

    At retirement options what flexibilities are schemes offering?

    More cash (UFPLS)? Accessing drawdown solution?

    Source: Aon Hewitt UK DC Survey 2015

    A majority of schemes are considering or offering extra cash flexibilities to their members

    A majority of schemes are considering or offering drawdown flexibilities to their members but not in their own scheme!

  • Aon HewittRetirement & Investment

    14

    Decumulation driven changes to investment strategy

    Developing themes in DC investment product development

    To & Through strategy

    ETFs to provide

    exposure to more niche strategies

    Drawdown focused funds

    New style annuity

    products

    Low cost multi-asset

    funds

    Volatility controlled

    funds may have a role

    More diversification

    within a passive play

    Greater sophistication in fixed income

    investing

    Source: Aon Hewitt

  • Aon HewittRetirement & Investment

    15

    Post budget(s) thinking integrated savings solutions

    Share save6,000 pa

    Your savings allowance

    General savings5,000 pa

    Registered pension10,000 pa

    Share incentive plan

    8,000 pa

    Corporate ISA20,000 pa

    LifetimeISA

    5,000 pa

    For illustrative purposes only

  • Aon HewittRetirement & Investment

    16

    Decumulation in AustraliaAiming for more comprehensive solutions

    AustraliaJenny Deanjenny.dean@aonhewitt.com

  • Aon HewittRetirement & Investment

    17

    Snapshot of Australia

    Total assets as at 31 Dec 2015AUD2 trillion

    1 ASFA Retirement Standard December 20152 Australian Bureau of Statistics 2013-2014

    Comfortable retirement income1

    Single AUD43K paCouple AUD59K pa

    Average balance of ages 60-642

    AUD293K AUD138K

    Recommended Target Balance1

    ~AUD545K single~AUD640K couple

  • Aon HewittRetirement & Investment

    18

    Welcome to Comprehensive Income Products