Product options for enhanced retirement income

A new stream of research proposes how people can increase their income in retirement by pooling their mortality risk. How one of these mortality risk-sharing rules could be implemented in practice, as part of a retirement income scheme, is considered. A potential advantage of the scheme is that a retiree’s housing wealth can be monetised to provide an income stream. This would mean that retirees can continue living in their home, without needing to downsize. It may be most attractive to the millions of single pensioners, particularly those who are “asset-rich and cash-poor”. Other types of assets that could be included and how to mitigate selection risks are assessed. A way of smoothing the raw mortality credits in order to make the scheme more appealing to potential members is proposed. An illustrative premium calculation suggests that the cost of the smoothing is very small compared to the potential attractiveness of an enhanced, smoothed income.