Investment choices have typically focused on one of two things – income or growth. But when Chancellor George Osborne delivered his Budget bombshell last March, he blew apart the traditional investment strategies centred around phased de-risking in the run-up to a set retirement date.
In the post-pension freedoms world, there is no need for a prescribed day on which a person retires. A pension becomes something retirees can dip in and out of and, however they are invested, they need income and growth at the same time. It is no longer a binary choice. Products need to be structured in a way that delivers both these objectives consistently, while not forgetting capital preservation.
As annuities and drawdown products are evolving to adapt to the changing pensions landscape, so too are fund ranges. There has been a raft of multi-asset funds and so-called “cradle to grave” launches recently, all looking to capitalise on the likely appetite among savers to stay invested for longer. In this month’s issue, we examine how fund groups are positioning themselves for the brave new world. Given the £12bn-odd that traditionally flowed into annuities, there is clearly a lot at stake.
But the pension reforms are about more than just a land grab for assets. Part of the reason the changes are so explosive is it means advisers will have to navigate a completely different market, with all the tax planning opportunities that involves. Advisers will also be on the front line when it comes to the practicalities involved – managing clients’ expectations about when they will have access to their pension, for example. Will providers be able to cope with potentially unprecedented demand? For that matter, will platforms?
We are now weeks away from the final Budget of the Coalition Government. While the industry scrabbles to be ready for April, there are undoubtedly more than a few firms who are hoping there aren’t any more rabbits out of the hat to contend with.
Natalie Holt is editor of Money Marketing