In January 2021, the Society discussed a paper “A New Approach to Auto-Enrolment. Higher pensions for half the cost” by Colm Fagan. The magic ingredients to halve the cost are (a) keeping annual costs and charges below 0.5%, partly by reducing saver choices and (b) investment in equities both pre- and post-retirement, mitigating the volatility risk via an inter-generational smoothing mechanism. 

The Pensions Council has considered the proposals and commissioned further research which has not been published at the time of writing.

In this webinar Andrew Smith discusses some of the actuarial issues, including the setting of provisions, model risk in relation to economic and demographic assumptions, weighing the benefits of higher expected returns against the remote probability of the fund’s exhaustion.