Annuities, on the other hand, tick a lot of boxes and most importantly give clients an income for life, but at what cost?
While rates are predicted to rise again in late 2019, they are still at low levels and offer people no flexibility.
All of these solutions may play a role in a client’s retirement journey, but none are optimal.
As a result, we are left looking to advisers for innovation.
We have seen an increase in advisers introducing the pots approach, having various buckets of investments that each serve a purpose – for example one to take income and one for capital growth.
This provides the adviser and the client with flexibility, liquidity, a diverse portfolio, the potential to leave a legacy and a cost effective solution.
This will also allow the adviser to address pound cost ravaging and sequencing risk. It may not pay a guaranteed income for life, but we are not going to find that unless you buy an annuity.
So why are not more advisers doing it this way?
This approach is fraught with inefficiencies when it comes to administration.
Given many advisers are doing this off their own back, this approach has not always been applied with sufficient science but rather using the long experience of working with clients on a daily basis, and as such advisers can get bogged down in the paperwork that is associated with it.
The challenge then is to mechanise the delivery of a service and remove the burden placed on advisers.
There have been a number of approaches to this, we ourselves launched a service to streamline the process for advisers last year.
But as an industry we must be look to help adviser service more clients efficiently and effectively, particularly at or in retirement.
It is time the industry listened to feedback from advisers on their decumulation planning challenges, and came up with solutions that make a real difference to the retirement income space.
Lawrence Cook is director at Thesis Asset Management
