Around the world, policymakers are reforming and building retirement systems aimed at delivering better outcomes for savers. Recently I read TIAA’s latest publication, The Future of Retirement Security: Converting Savings to Income - An International Comparison. It was a fascinating read, making a strong case for treating the income decision as part of the journey, not an after thought. I certainly agree with that.
TIAA is one of the largest retirement providers in the United States, managing over $1 trillion in assets, and has a mission to create retirement security for Americans. A very important mission with nearly half the population currently not saving enough for retirement.
The parallels between the US and the UK are striking. Although we can’t apply the TIAA findings wholesale to the UK reform debate, it’s really interesting and valuable to think about the similarities through that lens and consider what insights might be relevant.
The big idea: hybrid by design, not by accident
The TIAA Institute’s international review shows that the most resilient systems marry DB style lifetime income with DC style funding and choice. Pure DC designs often fail to convert balances into income, pure DB systems strain under longevity and market risks.
Key principle #1: The future is hybrid. Combine lifetime income with flexible drawdown so retirees can cover essentials with guarantees while keeping optionality for discretionary spending.
Make income the default pathway
Behaviour beats theory. Where annuitisation is voluntary and requires retirees to shop around, take up is persistently low. Where income choices are woven into the standard access path, annuitisation rises without mandates. Two strong examples are Switzerland and Chile: both require that retirees confront a simple, plan integrated menu at the point of access, resulting in roughly half of eligible retirees choosing full or partial annuitisation, all without compulsion. This is pretty staggering. The lesson here is not to eliminate choice, but to remove friction.
Key principle #2: Use the path of least resistance. Present income options natively in the plan (or via a national marketplace), with clear trade-offs and a simple “click to income” route.
Integration in practice
• Switzerland embeds annuities directly in occupational plans at regulated conversion rates; retirees can choose an annuity, lump sum, or a mix. Crucially, they don’t have to hunt for providers as the plan can pay the income, which materially lifts uptake.
• Chile routes everyone through a standardised national exchange (SCOMP) to compare annuities and programmed withdrawals side by side, making the decision unavoidable and comparable. Again, integration - not compulsion - drives adoption.
These structures illustrate a broader blueprint: set common rules nationally, standardise the menu, and simplify the last mile decision.
Build flexibility into guarantees
Lifetime income doesn’t need to be “fixed forever.” Countries are increasingly using variable or adjustable income frameworks and payments can move modestly up or down with markets, funding levels, or cohort life expectancy. That design preserves guarantees on duration (income for life) while easing pressure on sponsors and potentially raising expected income over time. It’s a pragmatic compromise between DB certainty and DC flexibility.
Key principle #3: Beyond fixed payouts. Offer variable annuity or pooled arrangements that can adjust within transparent rules, so guarantees remain sustainable and incomes remain competitive.
Who should annuitise? Target the “Goldilocks” middle
The international evidence points to a “middle wealth sweet spot.” Households with very low balances often gain little from annuitisation (social safety nets already deliver high replacement rates). High wealth households prefer control and bequests. Those in the middle benefit most from locking in a base income for life. System design should reflect that, nudge, don’t force, and make partial annuitisation easy (e.g., secure essentials with income, keep the rest liquid).
Key principle #4: Right size income. Default to a partial lifetime income that covers essentials, with simple opt ups (more guarantees) or opt downs (more flexibility).
A five-part blueprint for an optimal retirement income system
Drawing on these insights, I propose a five-part blueprint for an optimal retirement income system.
1. Integrate income at source. Make the conversion from savings to income a native step in every plan (or a universal marketplace), with standardised, comparable options and a simple “select and start” flow.
2. Default to partial lifetime income. Calibrate to the middle wealth group: default an appropriate share to guaranteed income and leave the remainder liquid with opt out always available.
3. Offer adjustable guarantees. Include variable annuity/pooled options that can adjust under clear rules, maintaining sustainability and improving long run adequacy. We’re into the realms of CDC here.
4. Standardise the national “menu,” not just the metrics. Create a common framework for providers (product types, disclosures, and comparisons) so retirees face fewer, better decisions.
5. Design for fairness through defaults. Use auto enrolment (or equivalents) and robust governance so that small employers and lower earners access the same quality as everyone else.
Conclusion
No country has a perfect system, but the direction of travel is clear. When annuitisation is easy, standardised, and embedded; when guarantees are flexible; and when defaults do the heavy lifting while preserving choice, more people retire with confidence and adequate lifetime income. Reformers have to juggle all this, but it seems clear of the need to hard wire the income decision into the core of the system.
Source: TIAA Institute, The Future of Retirement Security: Converting Savings to Income - An International Comparison (Kolluri, Reilly, Richardson), Oct. 2025.
Dan McLaughlin, UK Country Head – Festina Finance
