Traditional pension systems based on pay-as-you-go (PAYG) have become more difficult to sustain in developed countries as a result of continued population ageing, fewer children in the family and weak economic growth. Over the past decades, pension systems have gradually shifted from defined-benefit (DB) plan to defined-contribution (DC) plan. In DC pension schemes, there is no guarantee of pension payments after retirement, so it is important to develop appropriate decumulation strategies to efficiently convert wealth into income. The first part of this working paper systematically reviews two types of decumulation strategies: safe withdrawal rate methods and optimal control theorybased methods. The second part presents simulations of these strategies. In addition, we investigate the robustness of these strategies by simulating non-normally distributed returns of risky assets, such as Student’s t distribution and skew normal distribution. Finally, we test these strategies with forward-looking financial data simulated by Amundi Cascade Asset Simulation Model.

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Benjamin BRUDER
Senior OCIO advisor
Senior Portfolio Manager
Quantitative Analyst
Head of Quant Solutions, Multi Asset Solutions
Head of Employee Savings and Retirement Investment Team
RC - Author - Jiali Xu
Alternative Quant Portfolio Strategy, Amundi Investment Institute