Management Consulting

Aon and Aegon conducted a research study to explore the preferences of UK pension savers regarding decumulation options at retirement. The study revealed that 30% of defined contribution (DC) savers preferred a Collective Defined Contribution (CDC) pension over traditional options like annuities or income drawdown. This finding emerged from a survey of 1,150 respondents, primarily Aegon customers, conducted in mid-2022. The survey methodology involved presenting participants with trade-offs between the features of CDC pensions and their initial preferences for either annuities or income drawdown. Initially, 33% of participants favored annuities, while 67% preferred income drawdown. However, after evaluating the features of CDC pensions, 49% of those who initially preferred annuities shifted their preference to CDC, indicating a significant interest in this alternative. Conversely, 79% of those who preferred income drawdown maintained their choice, with only 21% opting for CDC after the trade-off analysis. The results highlighted that CDC pensions could address the needs of a substantial segment of DC retirees, particularly those seeking a balance between guaranteed income and investment flexibility. The study's findings support the Department for Work and Pensions' (DWP) initiative to consider a decumulation-only CDC arrangement as a viable third option for retirement income, potentially benefiting millions of DC scheme members as they approach retirement.