The interesting insights from the above are:

i) Some umbrella funds do not have any “paid from the fund” arrangements. Others do, but price them at the same level as individually purchased annuities. Only a few offer members the option of remaining invested in the institutionally-priced investment strategies they enjoyed prior to retiring.

ii) Umbrellas which offer “paid from the fund”pensions are, in the main, able to provide higher incomes because of their lower charging structures. For the person in the example above, this translates to an 8% to 9% increase in their annual income in retirement.

iii) Investment performance remains the key to a wealthy retirement.

iv) The expected post-retirement income as a percentage of your final pre-retirement income can vary vastly. In the example above the range is 51% to 104%, for the same level of contributions into the fund. These are very meaningful numbers.

The calculations above show that the effect of choosing the right umbrella fund which offers the right default strategies, both before and after retirement, could mean the difference between replacing your pre-retirement income in full or receiving only half of your pre-retirement income after retirement, despite making the same contributions over time.

Such a simple decision, yet such a vast difference in outcomes. You really cannot afford to leave your retirement provision to chance. Umbrella funds are changing and the market is evolving. It is important that employers review the umbrella fund options available in the market on a regular basis. It could make a difference between being amongst the haves or the have-nots.