Design of comprehensive income products for retirement using utility functions

Abstract

An approach for designing a menu of comprehensive income products for retirement (CIPRs) is proposed and demonstrated. The approach entails four steps: defining and characterising member types based on selected attributes; specifying a utility function to capture the objectives and preferences for each member type; conducting analysis of candidate investment and drawdown strategies, and hence select a product design; and communication to members. The last step uses attributes to describe the type of investor for which a product is designed, as well as setting out the key product features and the outcomes it may deliver. JEL Classification: D14, D15, E21, G11, G23