Having to convert your pension fund, your pension assets, into a pension annuity at the time of your retirement or shortly afterwards could prove to be “very costly” for a retiree and is “out of date”.
This is the view that has come out of a new report by the European Fund and Asset Management Association (in short, EFAMA), called ’Rethinking retirement income strategies: How can we secure better outcomes for future retirees’. A rather succinct title (!), but pretty clear that it looks at all pension options.
The report suggested that the best investment strategy for those in retirement was to hold a significant proportion of the pension fund in equities early on and then to switch progressively to bond holdings and pension annuities over time. Nothing new there.
If you keep a balanced asset allocation of your pension fund for an extended period after you retire, you can expect to achieve a substantially higher income when you retire, and at a comparatively low risk, the report claimed.
Their director general, Peter De Proft, stated that in an environment where retirees could expect to live 20 to 30 years in retirement, forcing them to buy a pension annuity at the age of 65 was an out of date ruling. He suggested that retirees should be allowed to select more profitable retirement products, and hoped that the various policy makers would take their findings seriously and agree to support on equal terms both pension annuities and innovative products such as the likes of sipps and variable annuities that use effective portfolio management strategies.
Income drawdown experts Intelligent Pensions have agreed that the best retirement strategy is to hold a significant part of a pension fund in equities early in retirement, switching to bonds and also to annuities over a period of time.
If you consider that buying a pension annuity is out of date and not for you talk to Origen about the available alternatives.
There is one option which combines phased drawdown with selective pension annuity purchase, but I think a specialist can best describe that.
