Think Tank Session #2

Think Tank Session #2

Decumulation Institute organized its second Think Tank Session in December 2014. The participants included Michael Peskin, former Managing Director and Head of Pensions at Morgan Stanley, NY; Malcolm Hamilton; Don Ezra; Bill Chinery; the financial columnist Jonathan Cheverau; fund governance leader Tom Iannucci; Paul Purcell; and John T. Por.

The discussions covered the following:

  • Given the Canadian landscape, what are the major gaps in effective decumulation strategies and? What could DC plan members currently do to maximize their retirement income under the current circumstances?
  • What direction Decumulation Institute should take in order to utilize its already and planned existing research and the combined experience of the Advisory Group?
  • Given the existing gaps between savings and the desired life styles of the vast majority of DC members, is the current suggested asset allocation of target date funds at and after retirement appropriate?
  • Given the lack of specificity and lack of direction of new CAPSA Guidelines No. 8., what are the key concepts concerning decumulation that plan sponsors should communicate to members so that they will be able to make informed decisions? This issue will be explored in detail as a result of and pursuant to the session, in the coming weeks

A most interesting discussions centered on the asset allocation question. On this issue, Don Ezra and Malcolm Hamilton held and debated two different views concerning the trade-off between safety and adequacy of retirement incomes. The discussions resembled the current US debate, whether savers should use Safety First (SF) or Probability Based (PB) app0raoch in decumulation. Depending on what approach is selected, the range of equity allocation could vary between 0 to 70%.

Another interesting discussion centered on what the use of the Institute’s attention and resources: should it assist existing financial institutions to solve the decumulation dilemma, or assist individual savers and retirees directly.

The Group thought that this question can only be considered in light what the Institute’s prime mission is: a) a business venture with both long and short term commercial objectives, or b) a not-for-profit initiative with no such limitations.