Changes to the retirement income landscape

You will appreciate how much the retirement income landscape has changed in recent years by giving people and their advisers greater freedom. But with greater freedom comes greater responsibility.

Investment strategies that work in the accumulation phase (climbing the mountain) may not make sense in the decumulation phase (descending the mountain).

Drawdown gives people flexibility with their pension funds but it also brings exposure to all the longevity and investment risks that were previously borne by insurance companies and employer pension schemes.

Unless these are addressed, people’s pension funds are unlikely to last as long as might be wanted.

Unfortunately, not all advisers take decumulation into account and I know this because I have spoken to a number and was surprised at the lack of foresight by them.  The problem with using accumulation funds to take income is that you have to sell capital value shares to provide the required income.  If the investment funds then fall in value, they cannot recover as the funds been sold and are no longer part of the client investment.  Known as a double whammy!

And it’s an issue that could affect more and more people. Figures published by the Office of National Statistics in May 2018 show the number of people in England aged over-65 is projected to grow by 19% between mid-2016 and mid-2026.  I see no reason why Scotland should be very different.

In the decumulation stage, the strategies we employ will endeavour help to preserve your funds by using effective retirement income strategies for you as clients.