Don Ezra Wants to Talk About it... but nobody else does

Don Ezra at Russell Investments wants to talk about decumulation. He is absolutely right to promote debate about decumulation. The issues he identifies are significant, and require forward planning, and this kind of debate should be had. I agree both personally and professionally. Having sat across the kitchen table from retirees who have 'outlived' their money I know that most people make exactly the mistake he has identified - they expect to die sooner than they actually will. That was their second mistake, relying on NZ super alone was their first mistake.

Don is right. Sadly, the debate may be a long time coming.

However, the debate on decumulation will be slow to burn. The balance of incentives is against the debate catching on. KiwiSaver is in its early stages of promotion - any effort by government to promote unpopular products as a destination for savings might stir up the suspicions of the public and retard growth of the product. So they will make polite noises, but leave it to later. From fund managers themselves wrapped up in the operational issues of implementation attention will be likewise, slight, limited to strategy gurus that are allowed to spend time thinking about things that neither make nor save money in the forthcoming year. Annuities themselves are unpopular even with actuaries - one New Zealand actuary described them to me last year as "incapable of being priced" and condemned them with "you will always be selected against". The public have little time for such esoteric arguments

Speaking of selection, one of the few countries with a functioning market in annuities - the UK - has recently seen a great deal of criticism focused on the decision of one or two companies to adopt a form of regional pricing based on post-codes. Money Marketing recently carrying an article suggesting that this patronised poor pensioners who should be better provided for by the state. If you think owning an HER could be a social embarrassment you'll never want anyone to know you get a better rate for your annuity because you've lived a life digging coal and drinking Newcastle Brown.