DC derisking needs a more personalised approach

The news that 20 Aon Hewitt defined contribution schemes have left members exposed to investment risk due to a lifestyling failure is clearly the result of an unfortunate blunder.

But it got me thinking how many DC members are making their own derisking mistakes as a result of poor engagement or simple misunderstanding.

It is estimated that 400,000 people retire in the UK every year with a DC pension. It’s also estimated that somewhere between 80 and 90 per cent of those members will be invested in the default fund, which is predicated on derisking and buying an annuity at retirement.

But a recent survey predicted just 40 per cent of retirees post-April will actually buy an annuity. So, it follows the rest should not be derisking to those safer asset classes.

By my simple calculations, that’s more than half of people heading in the wrong direction with their pension fund investment.