The Art of Managing Income in Retirement

Managing income in retirement has become a conundrum for our times, with advisers, clients and the pension industry all offering different ideas on the best way to solve the same problem.

It isn’t unreasonable for retirees to want the best of all worlds; flexibility, access and control over their retirement savings along with the reassurance that their money will last for as long as they do. But, what is the best way to deliver a consistent and robust outcome for every client in retirement?

Research has found that 53% of advisers said they adopted a centralised retirement proposition (CRP). However, when asked about when clients move into the decumulation phase and require income, overall 57% of advisers still used the same investment strategies, for both accumulation and decumulation.

However, the ongoing challenge that is facing advisers of clients who are moving from accumulation to decumulation in retirement, is one of finding a way to use products and investments to mitigate income volatility rather than a complete focus on capital volatility.

What is also clear is that decumulation in retirement brings with it a different set of challenges compared to the accumulation stage and maintaining the same investment strategy for both invites potential difficulties for both adviser and client.

Every client has different needs and objectives and we at ABFM have adopted, in most cases, a robust advice process specific to decumulation which allows for an investment strategy that can adapt to the post retirement rigors of pound cost ravaging and sustainability of income for life. A de-risked decumulation strategy also widens the focus for what lies ahead for retired later life, the vulnerability challenges, and changes to risk perception and capacity for loss.

Even those clients whom we have advised to follow a more traditional path, agree that a de-risked decumulation strategy will ultimately be necessary for them to follow.

We, as advisers, believe that we are at the centre of this revolution in retirement thinking because for most people, retirement will be a huge and important part of their lives, and as such needs the focus, consistency and surety that a decumulation proposition can offer.