Drawdown retirees unaware of income flexibility

A YouGov survey commissioned by Zurich* has revealed that most retirees in drawdown are unaware they can vary their level of income. And, perhaps unsurprisingly, the research also found those not receiving financial advice were more likely to be in the dark.

Importance of advice
The study suggests over half of individuals who have unlocked their savings since the introduction of pension freedoms in 2015 were unaware they could scale back or stop withdrawals from their pension funds despite flexible income being a key feature of drawdown.

A stark difference was also revealed in the knowledge of those who had sought advice and those who hadn’t. Indeed, while only 35% of non-advised retirees knew they could reduce drawdown  income, 77% of respondents receiving ongoing advice were aware of this fact.

‘Pound-cost-ravaging’ trap
There is a danger to this ignorance as it puts investors unwittingly at risk of draining their pension pots if stock markets fall. This is known as ‘pound-cost-ravaging’ (not to be confused with ‘pound cost averaging’) and is where people are forced to sell more investments to achieve unsustainable income levels. Engaging with your drawdown savings is vitally important; we’re here to help you
plan effectively.

“…over half of individuals who have unlocked their savings since the introduction of pension freedoms in 2015 were unaware they could scale back or stop withdrawals from their pension funds…”

*Zurich, June 2019

Tending your portfolio will make it bloom.

All successful gardeners will understand the need to regularly tend their plants, shrubs and lawns in order to ensure a garden can flourish. And, for investors, taking a similar approach with their financial affairs can also bear fruit by ensuring their investment portfolios don’t become neglected and, as a result, underperform.

Weeding, sowing…
As with a garden, your investment portfolio requires regular careful attention in order to ensure it continues to grow. Typical tasks include weeding out any perennially underperforming funds and switching to potentially more profitable ones and, for those with new money to invest, sowing the seeds of your portfolio with carefully selected additional new investments.

…pruning and trimming
Another important task is pruning. This will ensure your investment portfolio stays balanced and continues to fully reflect both your current and long-term financial goals as well as any changes in your appetite for risk.  It may also require taking profits at certain points in time to ensure you are using any potential tax allowances.

However carefully your initial range of investments were selected, your portfolio will also inevitably get out of shape over time. This creates an ongoing need to regularly review the allocation of different asset classes, such as cash, equities, bonds and property. And such a review may result in the trimming back of certain assets in order to restore balance to your portfolio.

Help is at hand
Many people now seek professional help to create and maintain their garden and it’s obviously wise for investors to do the same thing. Indeed, with ongoing political and economic uncertainties causing increased market volatility, there has arguably never been a more important time to seek professional financial advice. Keep in touch, so that we can help you keep your investment portfolio in full bloom.