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:
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.
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