Blended solutions can provide a smoothie retirement: Canada Life

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Blended solutions can provide a smoothie retirement: Canada Life

Advisers seeking flexibility and guarantees for clients, while meeting their desired level of risk and capacity for loss, could find this in blended pension solutions, a thought leadership paper from life and pension provider Canada Life has claimed.

Highlighting the potential risks people faced such as investment risk, especially at the decumulation stage, longevity risk and the impact of inflation and from annuity and interest rates, the paper claimed a blended approach would be “viable” for clients and their advisers.

It said this approach would be good for those clients looking for a mix of guarantees and flexibility or those with changing income requirements.

“The blended solution is another option advisers should consider for clients with multiple or changing or conflicting retirement needs,” the paper, published on the group’s website, said.

It also highlighted the plethora of options around mitigation of tax in the event of death and future innovations, which could be part of any blended solution.

“Even in situations where death benefits play an important part in client’s objectives, it can still be possible to provide varying death benefits for different family members, where it may be a secure income that is desired for a spouse and lump sums for adult children or total income flexibility.”

Research by Canada Life provided an example of client wanting to secure an income of £11,000 a year, without buying an annuity, and wanting to maintain a level of investment growth and have a flexible income in addition to his fixed income requirement.

With the intention to retire at 55, the state pension he could expect would be £6,029, but this would not be available until he was 67.

Therefore, he could best meet his objectives by combining products, as flexi-access drawdown would provide potential for growth, a hedge against inflation and flexibility for additional income.

Adviser view

Billy Burrows, director at London-based Retirement Intelligence, said: “One problem in the past, having an annuity or drawdown was presented as a black and white choice. Also, the difficulty for people with small pots has been that they could be served well by investing in both an annuity and drawdown, but had not been able to previously, so these new hybrid offerings make it easier for them.

“In a move towards more evidence-based advice, it is possible to show, for most people, a combination would produce a better outcome.”