Paid post by Quilter Investors

Recalibrating advice: decumulation in a post pension freedoms world

In the new world of pensions freedoms, advisers are having to recalibrate the role they play with clients approaching retirement. With a shift away from accumulation and steady savings, the decumulation phase requires careful planning, precise communication, and more than a little knowledge of the newfound options now available to clients.

Against this more challenging backdrop, Quilter Investors hosted a number of leading financial advisers at a roundtable event on 24 October to discuss how they’re adapting to the 2015 Pension Freedoms – and the opportunities that it offers.

‘There are lots of changes that are going on in the industry at the moment. Not least is this push by the regulator to encourage a different way of thinking about retirement savings after the Pension Freedoms,’ explained Anthony Gillham, head of investments at Quilter Investors. ‘I think that’s something that all of us need to focus on. And, as asset managers we have a responsibility to design products that support and specifically cater to that decumulation phase.’

And although the Pension Freedoms initially attracted some criticism, the participants said they welcomed the flexibility they’ve brought. ‘I think the freedoms have highlighted that flexibility is an amazing tool for clients,’ remarked Amyr Rocha-Lima, a financial adviser with Holland, Hahn and Wills. ‘With so many options now available, there’s a lot more working backwards; we ask clients their vision for the future, and then try and match an investment plan and objectives to meet that.’

With pensioners able to draw money from their pension pot from the age of 55, and with no requirement to purchase annuity plans anymore, some advisers said their role had become more focused on guiding clients through retirement, rather than outlining the limited options available.

‘I agree with Amyr, we’ve become much more goals orientated now,’ concurred Helen Warden, senior adviser at Hannay Investments. ‘It’s about their objectives, and motivations for wanting these things, rather than securing them the best possible income package. Of course, you want your secured income. But now there’s more aspirational desires…and it’s also more of an ongoing situation now, one that we can constantly reassess.’

That ongoing review process often makes advising more hands on, said the participants, but it also allows them to tailor and tweak their client’s retirement plans as circumstances change. Alex Morris, managing partner at Financial Relationships, noted: ‘It’s a constant evolution and review process. Each client’s different, but a typical client you see once or twice a year. However, in that five year lead up to retirement, you see them much more, and then you see them even more in the first few years of retirement. You want to make sure that they understand and can stick to the plan. And if they want change under the new freedoms, we can help them with that too.’

‘That’s certainly something we agree with and want to encourage – more engagement with clients as they move from accumulation to decumulation,’ replied Quilter Investors’ Gillham. ‘The types of risks that you face are very different, and when you’re no longer earning you have far less ways to respond to them and mitigate their impact. There’s still a massive education point that’s critical to helping these clients, especially with more freedom and flexibility in the past few years. That’s an area where we can definitely continue to add some real value.’