View more on these topics

Lazard soft-launches emerging market equity fund

Lazard has soft-launched a Dublin-domiciled emerging markets equity fund for Stephen Russell, Paul Rogers and Thomas Boyle.

The Lazard Emerging Markets Core Equity fund, which launched on 21 December 2012, aims to outperform the MSCI Emerging Markets Index but its stock selection is not constrained by the index.

The fund aims for long-term capital growth by investing in companies located in or doing significant business in emerging market countries. The investment team use flexible valuation approach to look across the investment spectrum and identify alpha opportunities across companies at different stages of development.

Russell, Paul Rogers and Thomas Boyle are named as portfolio managers and analysts on the fund. They are supported by analysts John Mariano and Celine Woo.

The $3m fund currently has an institutional share class with a minimum investment of $500,000.


Fidelity to stem flows in UK small cap fund

Fidelity has confirmed it is set to soft close its £248m Fidelity UK Smaller Companies fund managed by Alex Wright next week. The £248m fund will be removed from all platforms, including FundsNetwork, although existing monthly savings plans will be unaffected. The fund has returned 103.3 per cent in the past three years compared to […]


When to make drawdown your client’s flexible friend


The start of the baby boomer generation reaching state pension age is creating a new and significant retirement advice marketplace. Statistics provided from the 2011 census show that over three million people will reach state pension age over the next five years.

With people living longer and looking forward to a period of active retirement, managing and delivering effective retirement income from their accumulated savings will be key to that process.

A proportion of these clients will have benefited throughout their working life from the best value the state pension system will deliver, as well as receiving benefits from final-salary scheme pension arrangements that many were members of for at least part of their working life.

Guaranteed pension income from the state and from final-salary pension arrangements can provide a bedrock of guaranteed income with potential inflation proofing applying to at least part of that income base. Money-purchase pension savings, alongside other savings clients may have, are the potential areas where advice is needed on how best to use those savings to deliver income needs. Such advice can add real value to client relationships.

The money-purchase pension savings element of a client’s overall savings presents a number of income alternatives.

For many, the purchase of a lifetime annuity will be the only real option available and effective use of the open market option to secure the best available rates is now an essential “to do” action.

People with larger pension savings may want the ability to take income but continue to retain control of their investments, at least for the foreseeable future and is something they are happy to embrace. The use of capped drawdown is a solution that these individuals may seek to use, giving them control of their pension capital and access to a regulated annual income.

Timing of capped drawdown

Timing the move to capped drawdown to achieve the income levels they require can be fraught with difficulty, something which is becoming increasingly difficult as more and more legislative changes come into play.

So much has changed in just the last few months, from the changes as a result of gender neutrality in December 2012, to the increase in income factors by 20 per cent that started to take effect from 26 March this year, to the latest announcement of a new consultation on the GAD tables. It is no wonder advisers and their clients find it hard to keep up and the financial planning process has become increasingly complex.

Factors such as gilt yields that currently determine the maximum income available from capped drawdown arrangements fall outside an individual’s control.

Phasing in of retirement income from pension savings is becoming increasingly used as a means of retaining as much of a client’s pension savings for future use while at the same time creating effective generational tax planning if a client dies before age 75, lessening the tax charges on death.

Avoid the headache with flexible drawdown

Flexible drawdown would help avoid some of the headaches caused by today’s regulatory and economic environment for clients wishing to take full control of how they deliver income from their pension savings.

To benefit from flexible drawdown, people need to have a guaranteed pension income of £20,000 a year, so it is not available for everyone.

Someone retiring today at the age of 65 could potentially need to use up £260,418 of their money-purchase pension fund to meet the £20,000 per annum income criteria (to buy an annuity of £14,273 a year to top up their £5,727 a year basic state pension, assuming no final-salary pension and 25 per cent tax free cash taken).

They then have unrestricted access to the remainder of their money purchase pension savings.

Estate planning benefits

Flexible drawdown has many advantages over capped income withdrawal, but the estate planning advantages are possibly the most significant.

Phasing in their money purchase pension savings to produce the required income uses up less of their pension savings than capped drawdown would require. This leaves more of those savings for future use, and for payment of any lump-sum death benefit (which is not subject to the 55 per cent death tax before age 75).

Of course, once they approach age 75, the estate planning issues are even more prevalent.

Rather than leave money in a pension fund, subject to a 55 per cent tax charge on death, flexible drawdown enables them to withdraw more of their capital immediately, either to take as income or to gift to their beneficiaries while they are still alive, thereby making their overall estate more tax-efficient.

It gives clients complete control of how they want to use their pension savings to deliver their retirement income strategy, without the changing controls imposed under capped drawdown.

Holistic financial planning benefits

People with significant pension savings are also likely to have other savings, and looking at the client’s portfolio as a whole will enable the adviser to put a holistic financial plan in place.

As an example, someone with significant Isa savings could use that to provide tax free income in the early stages of retirement, initially leaving their pension untouched, meaning more could pass on to beneficiaries outside of their estate and free of tax

(if they die before age 75).

They could supplement their Isa income with some income from their pension savings under the flexible drawdown route – so still only moving into drawdown exactly what they need.

In summary

Meeting the flexible drawdown criteria is a one-off event. Once this is met, the individual can simply choose as and when they take their pension savings.

The Government has scheduled its review of the flexible drawdown £20,000 minimum income threshold for 2016.

The benefits of flexible drawdown are significant to eligible clients. Not only does it help protect their income level in retirement from any adverse regulatory conditions, but it gives them control and flexibility over how they use their money-purchase pension savings as part of an overall retirement income strategy.

Adrian Walker is pension specialist at Skandia

Case Study: The need to get risk assessment right

Question: When reviewing our advice process to ensure it is in line with the RDR, we are considering the way we assess clients’ attitude to risk. Why is this important? The solution: Flicking through a newspaper the other week, I noticed an advert on the back page. It read: “Have you suffered losses because you […]

Ashcourt Rowan hires Brewin Dolphin’s Burnham

Ashcourt Rowan has boosted its asset management offering with the appointment of Brewin Dolphin’s Harry Burnham. Burnham, who has been at Brewin Dolphin since 2000, will join the board of Ashcourt Rowan Asset Management. In his current role Burnham is responsible for a range of individual, trust and charitable portfolios as well as managing the […]

Mark Page: why my biggest overweight stock is a discount Spanish retailer

Artemis European Opportunities Fund manager Mark Page is questioned about the merits of investing in Spanish supermarket group, Dia. Dia is a 7,000-store Spanish discount supermarket chain. But with cheaper food prices coming on to the market and an improving Spanish economy, journalist Alexis Xydias questions Mark about its inclusion in the Artemis European Opportunities […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm