There are six Fidelity retirement funds, providing a choice of retirement dates between 2015 and 2040. The funds invest across equities, property securities, bonds and commodities through Fidelity’s internal fund range. The asset allocation will shift as the retirement date gets closer, moving from high growth in the early years through a high equity weighting to lower volatility in the later years through a bigger percentage of bonds and cash.
At the target retirement date, the retirement funds merge into the Fidelity Retirement Income Fund, another fund in the new range. Investors already in retirement, or close to it can invest in this fund without the need to invest in the retirement funds.
This fund is designed to provide a sustainable income for life, with the potential to rise over time in line with inflation because it will maintain some exposure to equities, property and commodities during retirement, rather than holding only fixed interest and cash. Unlike pensions, investors have access to their capital at any time and can pass on any remaining assets to their families
Fidelity recommends a 4 per cent withdrawal rate because this should provide relatively stable payouts with good prospects of their investment lasting their lifetime.
The company’s approach of remaining diversified across asset classes even at retirement is innovative and may attract a lot of interest, although some advisers will not like the fettered structure.
If a higher level of income is required than Fidelity recommends, investors may face the risk that their assets may run out too early. However, maintaining some equity, property and commodity exposure may help to prevent this