Faculty of Actuarial Science and Insurance Research Seminars - Alexandra Dias

Phased drawdown retirement plans and the gender pension gap

Abstract:
The progressive move from DB to DC pension plans is transferring from the state and employer to individuals the responsibility to manage the financing, investing, and spending of their retirement income. In countries as the UK and the US, financial institutions offer phased drawdown retirement plans which are popular among retirees to manage their pension pot although these products carry the risk of running out of funds. It is left up to the retiree to decide how to incorporate into their retirement plan their consumption needs, bequest preferences, investment preferences and, importantly, longevity risk. I investigate the effect on the retiree’s financial welfare of different investment strategies, consumption preferences and longevity risk.

The most important results include: phased drawdown retirement plans carry a significant probability of running out of funds; the probability of a female running out of funds can be 10% higher than that of a male; to keep the probability of running out of funds at an equal level a female will have a retirement income significantly lower than a male throughout all retirement; a gender pension gap is inherent to phased drawdown plans.

Keywords: Personal finance, retirement income plans, gender pension gap, longevity risk.

Biography:
Alexandra Dias is a Professor at the University of York who specialises in actuarial science and financial risk management. She received her PhD from the Eidgenössische Technische Hochschule Zürich (ETH Zurich) in Switzerland.

Alexandra has published research articles in finance, actuarial science, and mathematical statistics. Her current research is concerned with actuarial and economic aspects of pensions, including: retirement income strategies; consequences from replacing DB with DC pension schemes; inequalities in retirement income; and financial literacy.

Alexandra is a member of the Pensions Gap Working Party from the Institute and Faculty of Actuaries.