‘Consider the implications of pension freedoms’: fund manager

‘Consider the implications of pension freedoms’: fund manager

A fund manager has stressed the need for people using the pension flexibilities to consider asset allocation and withdrawal rates.

Eugene Philalithis, portfolio manager at Fidelity Worldwide Investment, said the pension reforms presented opportunities for investors, but pensioners faced the challenge of generating an income.

He said: “Traditionally, many savers have looked to annuities to provide a secure income, but low annuity rates and the potential for inflation over time are beginning to challenge the idea that an annuity is enough to support a retirement.”

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He highlighted the risks posed by longevity and inflation, saying: “Pensioners typically spend a relatively large proportion of their income on items prone to higher levels of inflation, such as food, fuel and utilities.

“Fidelity estimates that inflation for the over-65s could actually be around 1.44 per cent. If this rate persists over the long term, a pensioner’s income would need to rise dramatically over the years, if spending power is to be maintained.”

Adviser view

Dean Mullaly at London-based Mark Dean Wealth Management, said: “There is no magic answer when it comes to retirement income. At least with an annuity you have an income for the rest of your life at a set rate.”