You possibly don’t know this, but not everwhere in the world makes it compulsory to have to buy a pension annuity at retirement.
In fact, the sale of annuities is dogged by poor demand in places where annuitisation is not compulsory, according to Fidelity’s David Dunn, in a speech at the Personal Finance Society 2008 Value of Advice Conference. He stated that if you look around the world there is not a single country where outside of compulsory annuitisation, there is a material market for conventional annuities. In other words, if retirees don’t have to buy one, they don’t tend to.
Dunn said whilst there was an acknowledgement in the world that life expectancy was increasing there was generally a lack of financial preparedness for it. There is a distinct lack of financial planning going on out there when it comes to the subject of retirement.
Have we got it right in the UK, where the purchase of a pension annuity is insisted upon?