Multi-assetFeb 26 2015

Aviva raises question on re-packaged retirement funds

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Aviva raises question on re-packaged retirement funds

Existing multi-asset funds being re-packaged as at-retirement alternatives ahead of a likely into non-traditional income options after April may not meet the specific suitability requirements of the new audience of retirees to which they are being marketed, Aviva Investors has said.

In the latest FTAdviser Guide to Multi-asset and Pensions, several fund managers note an increase in the marketing of income generating multi-asset funds as a ‘cash plus X per cent’ target product.

Firms across the industry have rushed since the Budget to re-package older funds or launch new spin-off products which could be wrapped into the pension environment and provide an alternative to an annuity or more traditional drawdown.

But old balanced managed type funds, which aim to beat a peer group or a fixed benchmark, will not necessarily deliver the outcome-based solution at-retirement clients need, Nick Samouilhan, multi-asset fund manager at Aviva Investors, said.

Mr Samouilhan said multi-asset legacy funds are not usually designed to meet the new needs of clients who no longer have to use their pension cash to buy an annuity come April and advisers need to look at whether managers are adapting their vehicles.

Vincent McEntegart, manager of the Kames Diversified Income fund, said managers are adding more specific income criteria to funds, so potential investors can get an idea of how much these “replacement” products can deliver versus an annuity.

As well as adding specific income targets, Mr Entegart said we could also see fund groups stress the defensive nature of multi-asset funds and how they can protect capital while delivering an income.

However he raised concerns about the way even these new multi-asset offerings are being marketed.

He said: “Fund managers will need to make clear that while their income solutions are attractive alternatives to annuities they do not provide guarantees.

“The investor will need to decide if absolute certainty matters most or if they can accept some uncertainty in pursuit of a higher income and/or a higher total return. Retirees buy annuities because they guarantee an amount of income for life.”

To read the full guide and earn one hour’s CPD, click here.

emma.hughes@ft.com