PensionsMay 8 2013

Bond market risk could hit lifestyle funds, says Axa

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One in 10 respondents participants in the quarterly adviser poll said the option has become too risky, while 21 per cent did not believe it brings any risk.

One-third of advisers said that less than than 10 per cent of clients had asked them to review their pension and investment portfolios following recent events in the bond market, while 58 per cent of clients had not raised the issue at all.

Simon Smallcombe, head of guaranteed distribution for Axa, said: “Billions of pounds of pension assets are invested in lifestyle funds and yet the potential risk to investors has not been widely discussed. From our research, it seems most advisers have not been asked to consider these risks by clients.”

Jason Witcombe, director of London-based Evolve Financial Planning, said: “Lifestyle funds are good in theory but I wouldn’t want to have 100 per cent of a pension fund in long-dated bonds if I were 59 and retiring at 60.

“They’re built on the idea that people buy an annuity, but you’d need a totally different strategy for somebody who’s looking at income drawdown.”

Advisers’ attitudes to pensions invested in lifestyle funds:

Too risky – 13%

Riskier than they were a year ago – 56%

Not risky – 21%

Do not know – 9%