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• Mind the Pensions Gender Gap
• Is your pension losing to lifestyle?
• Taking Care of Business
• Redundancy payments
• What is driving your financial decisions?
• Tax Efficient Income
• Introduction to Offshore Bonds
• The tax efficient nature of pension contributions
• It's time to get Tax Smart
• Don't wait for the Pension Dashboard
• Are you Retirement Ready?
• Can I cash in my pension before the age of 55?
• Defined Benefit Transfers 5 Years On
• Why would anyone buy annuities at current rates?
• DB Transfer Case Study 1: accessing a larger tax free cash sum and continuing to work
• DB Transfer Case Study 2: taking a transfer to create more cash and income in the early years of retirement

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Is your pension losing to lifestyle?

Lifestyle strategies were first introduced in the 1980s and remain the default investment style of choice for most employers with Defined Contribution pension schemes.

Lifestyle profiles initially invest in growth assets which can have more risk attached to them and, as the member approaches their nominated retirement age, funds are progressively switched into less volatile fixed interest investments, such as cash and gilts. Ultimately they are designed with aim of using the pension to purchase an annuity at retirement; the ‘de-risked’ funds shelters the portfolio against markets falls immediately prior to retirement.

Like most financial products, pension planning has evolved since the 80’s and now, for many savers, this strategy can present several drawbacks:

• The timing of the switching is based on a pre-determined retirement age that will likely have changed, particularly if the plan was started at the beginning of a person’s career.
• Many people are retiring later, phasing retirement and the simplistic automatic switching process may have commenced prematurely, resulting in limited growth.
• Less than 10% of pension funds are now used to purchase an annuity.
• Cash and gilt rates are currently poor and therefore members are losing out on growth potential in the years leading up to retirement.
• Investors in this strategy may be faced with low, no or negative growth prior to retirement and low annuity rates at retirement, if they decided to purchase an annuity

Today, more individuals are choosing a flexible drawdown retirement and will therefore remain directly invested beyond their retirement date. This throws in to question the need for fully de-risking funds. Once in retirement, liquidity is needed to meet immediate and short term income needs; on the other hand, investment growth is required to support future needs, together with protection against long term inflation.

Tideway’s Horizon approach is specifically designed for individuals looking to use income drawdown in retirement with a view to deliver stable returns ahead of inflation. The portfolios reflect the realities of a more complex investment arena and changing personal circumstances, allocating capital into three broad time horizons. In the current financial landscape, Horizon planning should be given as much attention as asset allocation when building any retirement portfolio.

Tideway specialise in providing retirement advice, offering each client their own dedicated Wealth Manager who is responsible for formulating a bespoke plan within an appropriate investment strategy and risk profile.

We offer free retirement Guidance Sessions to help with planning for the years ahead. If you or someone you know wishes to take advantage of this service, please book here.

Tideway also offers free bi-weekly communication updates, commenting on financial markets and our investment portfolios. Click here to subscribe to the Tideway Market Update.