Drawdown  

Drawdown portfolios facing Covid test

“When you have a global pandemic of this scale that’s causing worldwide economies to grind to a halt, no amount of diversification within your portfolio can protect you from this.

“We have not changed our drawdown advice following the Covid-19 crisis as it’s largely down to the individual’s personal circumstances.”

Using hybrid drawdown

William Burrows, retirement director at Better Retirement, said if drawdown was set up correctly in the first place, then “there is nothing to worry about”, but that the real challenge is whether advisers have practised what they preached.

Mr Burrows said advisers had all talked “about the risk of sequence of returns, and my approach has always been to try and have a couple of years’ worth of income in cash or low risk assets to balance this.

“It’s always harder in practice than theory, but the important bit going forward is that advisers need to make sure they build up a significant cash buffer so if this happens again people are not caught out”.

Mr Chan said he often turns to hybrid drawdown solutions, which combine the investment benefits of pension drawdown with an annuity to provide a guaranteed income until death.

He said: “We always consider hybrid drawdown solutions, because we believe annuities still have a role to play to provide some guaranteed income to cover key expenses in retirement. It depends on the clients’ financial plan to achieve their short, medium, and longer-term objectives.”

But Mr Cooke has not yet considered hybrid solutions as he said they do not offer the best outcome and could often be expensive.

Mr Cooke said: “I haven’t considered hybrid solutions and I have no clients with hybrid solutions, so I can’t comment if people in hybrid solutions have fared better or not.

“Generally you end up with the worst of both worlds: a poor annuity and a poor investment option, and initially they were also quite expensive.

“If I wanted to run this for a client I’d set up a self-invested personal pension, buy an annuity through that at best market rates and then run an investment solution through a decent platform with full investment options. It would probably be cheaper as well.”

He added: “I’m not finding any difference in talking to clients about their pensions or drawdown because I’ve already been talking to them about an event in markets happening like this for some time and building that into their plans already.

“They all knew this would happen one day and they all know their plans can withstand it.”

amy.austin@ft.com