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Income drawdown schemes for a defined-contribution pension plan

Emms, P. & Haberman, S. (2008). Income drawdown schemes for a defined-contribution pension plan. Journal Of Risk And Insurance, 75(3), pp. 739-761. doi: 10.1111/j.1539-6975.2008.00282.x


In retirement a pensioner must often decide how much money to withdraw from a pension fund, how to invest the remaining funds, and whether to purchase an annuity. These decisions are addressed here by introducing a number of income drawdown schemes, which are relevant to a defined-contribution personal pension plan. The optimal asset allocation is defined so that it minimizes the expected loss of the pensioner as measured by the performance of the pension fund against a benchmark. Two benchmarks are considered: a risk-free investment and the price of an annuity. The fair-value income drawdown rate is defined so that the fund performance is a martingale under the objective measure. Annuitization is recommended if the expected fair-value drawdown rate falls below the annuity rate available at retirement. As an illustration, the annuitization age is calculated for a Gompertz mortality distribution function and a power law loss function.

Publication Type: Article
Additional Information: This is the accepted version of the following article: Emms, P. and Haberman, S. (2008), Income Drawdown Schemes for a Defined-Contribution Pension Plan. Journal of Risk and Insurance, 75: 739–761, which has been published in final form at
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:
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