UK - Alliance Bernstein is investigating the development of income drawdown in retirement, which might follow a target date investment approach so investors continue to make gains on their holdings.

David Hutchins, head of research and design for UK DC at AllianceBernstein, will present his ideas for the adaptation of existing income drawdown strategy at the National Association of Pension Funds' Investment Conference on 11 March, where he will speak on a panel session questioning whether there will in future be sufficient assets to buy fairly priced annuities.

While any such ideas are still considered to be early thinking, Hutchins believes there will be a gradual shift away from annuities towards income drawdown, even among pensioners with smaller pension pots, because the cost and supply of government bonds is making annuity purchase increasingly expensive.

Similarly, some pension scheme members may not want to retire immediately, so postponing the annuity purchase and buying a form of target date income drawdown might allow investors to continue to generate returns prior to buying an annuity, and protect against inflation but perhaps take some assets from the pension pot, according to AllianceBernstein.

Target date funds have been a popular concept in the US but hit some problems in 2008 and some retirees lost 20-40% on their investments during the market downturn because they carried high exposure to equities.

Research into the concept is still ongoing at AllianceBernstein so no further information on asset allocation or strategy is available at this stage.

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