Jean Evans, financial planner at PK Group, explained: “With all the limitations now, in terms of annual allowance caps and so on, tax efficiency is all about broadening the investment choice and investment product choice.” So Isas are in that mix, along with VCTs, EIS, investment bonds, as well as pensions as much as they possibly can be. A combination of these can provide a very tax efficient income going forward, she suggests.
Such diversification obviously pays if the combination of assets produce a real return. Indeed, investors need their assets to keep working hard for them to produce returns for a longer period of time, and from a pot that is decreasing in size due to drawdown.
Therefore, the right level of risk needs to be taken to both protect capital and to produce a sustainable income stream – a fine line to tread, but one that some retirement-focused solutions aim to address.
“I don’t think it’s necessarily all about de-risking the portfolio in its entirety,” remarked Danny Knight, head of investment directors at Quilter Investors. “You want it to work a lot harder. I think that’s something that people need to understand a lot better as well, particularly as they aim to balance all of these risks such as inflation.”
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