Samantha Pardoe, senior investment development manager at Standard Life
Retirement is a pivotal life stage, but the period leading up to it is often marked by what's known as the Retirement Risk Zone. This period typically spans five to ten years before retirement and brings about a shift in mindset. As individuals approach the end of their income accumulation phase, their focus shifts from maximising market gains to preserving their savings.
"You've finished with accumulation, you get to the point where you're probably not going to buy an annuity with the whole fund value anymore and a lot of clients aren't doing that because they want that flexibility, so that money is going to stay invested," explains Pardoe. "But you do need to start doing something to preserve that pot that you spent a number of decades building. That's a perfect spot for smooth funds," says Samantha Pardoe, senior investment development manager, Standard Life.
Standard Life's Smoothed Return Pension Fund is a strategy designed to smooth out market movements and give investors greater peace of mind. Though she warns a Smoothed Fund won't nullify major market drop offs, she explains how this strategy can play a helpful role in the day-to-day ups and downs of markets that may concern investors.
In decumulation, investors are still concerned about volatility but with the added concern of extracting income as well to cover day-to-day expenses. Fortunately, the flexibility of smoothed funds can offer more than one route to income for those in retirement. With a smoothed fund, investors in retirement can either rely solely on the strategy for decumulated income or use this as part of a bucket strategy. In the latter, another source of income such as an annuity or cash provides the regular income while a smoothed fund acts as a second "bucket."
"We're taking some of the risk off the table for clients and giving them something that is a much more stable journey for them that helps them to sleep at night," says Pardoe of retired investors using the Standard Life Smoothed Return Pension Fund. "But we're still giving them that flexibility that they want and that's really key for a lot of clients at the moment."
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