Income yield above 4% is unsustainable: Aviva

Income yield above 4% is unsustainable: Aviva

Advisers and investors recognise an income yield above four per cent is not an obtainable nor sustainable level of return without jeopardising capital, Euan Munro has said.

“Before the global financial crisis, achieving a 5 per cent target was not an unrealistic income goal,” the chief executive of Aviva Investors said.

Research by the fund house has shown that eight in 10 IFAs and discretionary wealth managers believe an income of over 4 per cent was not sustainable, recognised also by their clients, with six in 10 agreeing it was not sustainable.

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Multi-asset and multi-strategy funds were considered the best means to achieve sustainable income by up to half of investors and investment professionals because they offer diversification, the potential to deliver income and growth and sustainability at a reasonable cost.

The survey also revealed that 59 per cent of advisers saw their role as more challenging in the post-pension freedoms world while, at the same time, advisers believed their job was more rewarding, according to 40 per cent.

The report surveyed 240 intermediaries and 500 private investors in June and July this year.

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Peter Toogood, investment director at London-based City Financial, said: “The report provides a thorough and robust analysis of the challenges faced by intermediaries and their clients in providing a sustainable income in retirement.

“The myriad issues associated with greater pension flexibility are discussed at length, as are the responses from interested parties. One of the key messages from the report is the significant benefit of maintaining a diversified portfolio for clients – a sentiment which we wholeheartedly endorse.”