Dominic Lindley: I don’t think you can. People underestimate their own longevity. What you need to do in terms of withdrawing from your pension is to be clear at the start and it needs to be reviewed regularly. Not only do you need a pensions passport at the start—because if you have four separate pension schemes you need to bring them together, know where they are invested and know how much you have in total—but you almost need some kind of dashboard which, as you withdraw money from your pension every month, shows you whether you are going too fast or too slowly. That is the other risk: you just leave the money accumulating and do not spend it, even though you need it. If you are given a pensions dashboard, which shows at your current withdrawal rate when you will run out of money, then you can adjust that.
One of the big issues about income draw-down is that more people will use it and those products have both investment and longevity risk. If you live through a period of very volatile returns, like the financial crisis, then if you keep withdrawing at the same rate you will pretty soon run out of money. So the guidance guarantee not only has to be an at-retirement thing; it has to have space for regular review. Fundamentally, on income draw-down, those products have to offer value. You are taking extra risk by staying invested in riskier assets. If all of that extra return is going in charges, you are not getting any benefit.
Finally, annuities are not going to completely disappear. Many of them will be bought later and will remain appropriate for people to buy at much later ages. We have to make sure that people get asked proper questions about medical history. We have to stop insurance companies offering poor rates. So you can put regulation on insurance companies to act in best interest or you can set up an annuity clearing house like they have in Chile. If a consumer wants an annuity quote, they can go to the clearing house and get a competitive quote even though that might not be the absolute best.