Options for choice in pension decumulation: international experience

Participants of DC pension systems in Australia, the UK and Switzerland can choose between a lifelong annuity, pension drawdown or a lump sum. Participants in Denmark can choose between a lump sum, a fixed pay-out horizon and a lifelong annuity, but the choice for a lump sum or a fixed pay-out horizon is limited. Participants in Sweden can choose between fixed-term or lifelong annuities, while lump sum is only allowed for very small pension pots. Participants with small pension pots often choose a lump sum, while participants with large pension pots often choose drawdown, fixed-term or lifelong annuities. Income tested benefits stimulate lump sums, while progressive taxes stimulate drawdown and annuities. Many participants choose the default option. Lump sums are often used for paying off debt, housing, cars, travelling, saving deposits, equity and family support.
A partial lump sum could be interesting for participants in the Netherlands as well. Currently, participants in the Netherlands always receive lifelong annuities. Surveys among Dutch participants indicate they are interested in a partial lump sum as well. In order to protect participants against unintended low replacement rates, a lifelong annuity could remain the default.