Chapter 18. Product Innovation With Decumulation In Mind

This chapter looks at the types of investment products that are starting to become available to fill the gaps we've identified. The first gap is the lack of a popularly accepted means to convert a sum of money into a lifetime income: As we described in Chapter 16, the lifetime annuity achieves this goal, but the way in which it does so has meant there has been in practice relatively little demand for these products. The second gap—described in Chapter 17—is the lack of a way to address simultaneously the problem of longevity protection and the problem of investing your accumulated assets.

These are big gaps. There is a huge amount of wealth that is shifting its focus from accumulation to decumulation, as the Baby Boom generation reaches retirement age. Unsurprisingly, the financial community is responding with a flurry of innovation, designing products to fill these gaps that they hope will win greater popular acceptance than traditional lifetime annuities have been able to. At this early stage, it is hard to tell which new features or products will prove to be the most appealing. Hence the rash of product innovation. Let battle commence!

In this chapter, we will describe some of the new products under six broad headings. The products that we will describe are not all available in every country, or necessarily widely available in any one country. But their features are well known and understood, having in most cases been discussed ...

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