Platforms & Pensions
Impact of sequencing risk on portfolio in drawdown
Scenario 1 ( Evenly spread returns )
Scenario 2 ( End with bad years )
Scenario 3 ( Start with bad years )
1,000k
Remaining fund value (£) |
800k
600k
400k
200k
0
|
Age
Source : EV
Annuities are typically sold by insurance companies , but their popularity waned after the pension freedoms of 2014 , due to their lack of flexibility and their failure to offer substantial additional capital growth over a longer retirement , particularly for bigger pension pots . The other problem with annuities is they can be complicated . There are several different types of annuity , with markedly different income levels , depending on which one you choose . The main types of annuity are :
• Lifetime
• Fixed term
• Enhanced
• Investment-linked
• Purchased life
The product that is currently attracting the most interest is the fixed-term annuity , which can be used as a “ side car ” solution to your standard drawdown strategy . In a perfect world , with a looming financial crisis , you ’ d tip enough of your retirement pot into a fixed-
Issue 89 - November 2022 / 67 /