helping members take responsibility for their retirement: lessons from abroad by rob rusconi

Helping members take

responsibility for their

retirement

Lessons from abroad

Rob Rusconi, Tres Consulting

Top tips for retirement saving

What this address is not

Top tips for retirement saving, or

a summary of everybody else’s smart thinking



a summary of everybody else’s thinking

Because:

- we’re not economic units




Because:

- we’re not economic units,

- our lives and paths are unique




Because:

- we’re not economic units

- our lives and paths are unique, and

- we only have once chance


We might wonder whether anybody really cares any more

- DC members bear the risk

- Employer no longer funder of last resort

- Power lies in theory with the trustee, but in practice with the financial services industry

- And advice from the industry is not entirely trustworthy

At the heart of the problem

We might wonder whether anybody really cares any more

- DC members bear the risk

- Employer no longer funder of last resort

- Power lies in theory with the trustee, but in practice with the financial services industry

- And advice from the industry is not entirely trustworthy

Few financial advisers have the right incentives to care

- seldom remunerated on quality of advice

- seldom there to help when things go wrong

At the heart of the problem

Running out of Money Before you Run out of Time

The Big Retirement Risk

Erin Botsford, publ. Greenleaf




Good core message

- Take control of your retirement planning

- Plan ahead with the goal in mind

- Take care accepting the wisdom of experts

- Invest assets in retirement for income

Great advice on distinguishing needs from wants and hopes

Good explanation of the characteristics of asset classes




Pessimistic on equities

- Yes, equity returns are volatile

- Yes, entry and exit timing can be lucky

- But, no, shares are not just a risky asset

- Not even an asset whose return rewards the risk taken

Shares are a good match for your pension liabilities

Though you must take care of the volatility of share values

A Pension Promise to Oneself

Stephen Sexauer & Laurence SiegelFinancial Analysts Journal vol 69 no 6 p 13



Another good core message: take responsibility

- Consider your DC savings the way an actuary would a DB fund

- Work out your liabilities and discount them

- Accumulate assets on the basis of an economically sound plan

- De-cumulate in old age to preserve the value of longevity pooling

Be prepared to make personal fiscal adjustments



Main criticisms

- Sophistication beyond the reach of most

- Need for external information on retirement rates

- Assumptions probably unduly conservative

Personal fiscal adjustment unlikely in practice

Takeaways: for members

Take personal responsibility

Learn along the way

Careful with your trust

Live for tomorrow

Do not overestimate competence

Takeaways: for trustees


Learn along the way


Takeaways: for trustees


Learn along the way


Live for tomorrow

Do not overestimate competence

Thank you

helping members take responsibility for their retirement: lessons from abroad by rob rusconi

Economy & Finance