Does decumulation need a shake-up?

This is supported by the Cicero report, which found that in 2015 advisers were typically starting conversations about retirement income when clients were aged around 50. But in just three years this age has dropped by almost a decade.

Dhawal Chandan, chartered financial planner at Just Financial Group, says: “The education piece is one of the most important aspects. We start educating our clients from the accumulation phase onwards. From that we get a gauge in terms of the client’s income requirements, and then work out cash flows and financial plans on that to give them a realistic idea of what they’re aiming to have.”

From a client perspective, Cicero also identified an increase in the demand for flexibility over the past three years (from 73 per cent to 79 per cent). That was to be expected, but other results did show a degree of conflict between client and adviser priorities.

Whereas clients now feel less eager to remain invested during their retirement, and more positive on annuities – ‘anti-annuity feeling’ fell from 51 per cent to 36 per cent – the latter is not the case for intermediaries. The proportion of advisers who said conventional annuities represented terrible value no matter what the pot size rose from 22 per cent over the period.

Despite that, blended approaches to retirement income are still common among the advisory community, as Table 1 shows.

Table 1: Blended approaches to retirement income


Likelihood of adviser considering approach (on a scale of 1-7)

Annuity for basic spending, remainder in drawdown


Move all assets from annuity to drawdown when the time is right


Gradually phase from annuity to drawdown


Drawdown plus product paying lump sum if client lives beyond a certain age


Source: Cicero. Copyright: Money Management


Ms Kenny also thinks that a combination of annuities, alternative investments, centralised investment processes, plus ongoing service is the right approach.

“Service is going to be increasingly important, because you need to consider sequencing risk to help clients avoid drawing down from their pots when markets are low, for example,” she says.

“Asset allocation also needs to remain flexible if retiree clients are still invested in markets to make sure it is appropriate across all their tax wrappers, so that ongoing management will be key as this area grows.”

It remains to be seen whether this will filter through to sales figures. The latest data from the FCA, released in September 2018, showed annuity sales in the six months to last March were around a third of drawdown sales and less than a quarter of full cash withdrawals.

Staying central

One area on which most advisers can agree is the need for centralised retirement processes. For the accumulation phase, centralised investment processes have been gaining traction in the past few years, but the retirement phase is still underdeveloped. 

When surveyed by Cicero, 72 per cent of intermediaries either agreed or strongly agreed there was a need for a more robust and centralised retirement income planning process, and only 3 per cent disagreed, with no one disagreeing strongly (see Chart 1). Perhaps the greatest concern is the lack of change from just three years ago, when 71 per cent of advisers said the same thing.