Retirement income challenge: we need round pegs for round holes

Anthony Gillham, co-investment director, multi-asset, OMGI, comments on the interim findings of the FCA’s Retirement Outcomes Review.

This week the FCA has voiced concerns that a number of consumers taking advantage of the so-called pensions freedoms have chosen "unsuitable investment strategies.”

With more people in drawdown than ever before, the availability of investment solutions specifically designed to meet the unique investment needs of retirees is of the upmost importance.

Given the complex factors to be taken into consideration when investing during retirement, a simple 'off the shelf' income solution may not be an appropriate long-term investment. Retirees not only need a sustainable, flexible income, they also need to focus on capital preservation, protect against the ravages of inflation and manage downside defence, to limit the potentially damaging effects of falling markets. Building a genuinely diverse portfolio that manages all of these risks is a minefield for any DIY investor.

In our view, this complex situation only signifies the importance of investors at this stage of their financial journey seeking professional advice.

As one of the first asset managers to develop an innovative investment solution designed specifically for investors taking advantage of the pension freedoms, we are glad that this issue has been raised by the UK regulator in its Retirement Outcomes Review. The Old Mutual Generation Portfolio range was built in conjunction with financial advisers to meet the needs of investors approaching or at retirement. The actively managed, multi-asset portfolios aim to beat inflation and offer the potential for capital growth. At the same time, they seek to mitigate against the impact of market falls – which can be especially destructive for those clients withdrawing money from their portfolios – through a focus on short-term risk management.