Different decumulation strategies are needed if investors are to achieve what they expect in retirement, according to Intelligent Pensions' Fiona Tait.
Ms Tait, technical director for Intelligent Pensions, told advisers gathered at the FTAdviser Income for All roadshow in Exeter today (16 May) that people need different portfolios in decumulation than in accumulation.
She said: "Most investors carry on doing in retirement what they had been doing while working and saving, but their pots are now no longer generating growth - they are paying out income instead.
"When people see their investments growing well, then they are loath to change, but the decumulation stage needs a different strategy.
"We need to help educate people more during the accumulation stage so they understand how to invest in the decumulation stage, to understand how to manage their income withdrawals from the portfolio over time.
"It is not all about the returns, it is also about the risks - we must look at capital preservation over time, not just capital accumulation."
Adviser Mike Harms, of Medical and General, commented on managing client expectations of income.
He said: "Understandably, people want a stable income, but often their desire is greater than what is an expected, stable income.
"Yes, many clients are realistic and will live within their means, but the demand for income and the reality of what income can feasibly be generated from a diversifed portfolio are two different things.
"We try to educate clients that drawdown portfolios need to be managed to slow down capital erosion rather than chasing increasingly fantastic levels of income."
Ms Tait also praised the prototypes of the pensions dashboard which give, in clear income terms, what individuals can expect each year in terms of income from their accumulated pension pots.
"I think this is positive. People have to manage their income and the prototype moves us away from conversations just about the cash value of the pots to actual income projections."
The highly anticipated pensions dashboard prototype was recently unveiled to government ministers in a two-day initative as part of UK Fintech Week.
Headed up by the Association of British Insurers (ABI), the dashboard project will not be rolled out until 2019, but its data standards – technical information on data presentation requirements for firms – are now in the public domain.
As a cross-industry collaboration involving HM Treasury, 17 pension firms and six technology companies, along with extra support from regulators, the dashboard is likely to be available under several providers as opposed to being a central vehicle.
While the 17 providers currently involved in the project participated on a voluntary basis, Simon Kirby, economic secretary to the Treasury, has proposed making future participation mandatory for firms.
Mr Kirby said he is in talks “with the minister for pensions to see how this might be made compulsory if schemes do not do so by choice”.
simoney.kyriakou@ft.com
