Advisers say multi-asset is best retirement solution

Piggy bank with pensions savings overflowing

According to a survey conducted by Barings Asset Management, 56 per cent of independent financial advisers (IFAs) say that multi-asset funds are the best choice for retirees seeking to generate an income over a 20-year period.

The research, which canvased the views of over 100 UK financial advisers, also shows that more than a quarter of IFAs believe that a single multi-asset income fund is more suitable than multiple income funds across different asset classes for those looking to draw a retirement income.

When asked about the most important factor when assessing the suitability of a drawdown fund, the overwhelming majority of advisers (87 per cent) pointed to charges, suggesting a key reason why a single multi-asset fund may be favoured. Frequency of income was second, with 69 per cent of advisers choosing it as the most important factor.

RETIREMENT PRODUCTS

A further 54 per cent of respondents say that pension reforms introduced in April will mean that multi-asset income products will become more significant for people post-retirement.

Commenting on the survey, Sonja Laud, head of multi-asset income at Barings, says: 'As people live longer, being able to draw down income post-retirement becomes more and more important. Our research has clearly demonstrated the value that IFAs place on multi-asset funds and in particular the levels of income they can provide post-retirement.'

Traditionally favoured for their lower volatility compared to single asset funds, multi-asset funds are increasingly being promoted as retirement income products. Some of the top-paying funds reside within the Investment Association mixed investment 20% to 60% shares sector, where nearly a quarter of funds pay an annual yield in excess of 3 per cent.

The highest yielding multi-asset fund is Scottish Widows HIFML Diversified Income, which pays 6.2 per cent a year, followed by Schroder Mixed Distribution and CF Seneca Diversified Income, which pay 5.84 per cent and 5.57 per cent respectively.

POST AND PRE-RETIREMENT SOLUTION

Barings' research also showed that multi-asset funds ranked as the most popular default funds for people approaching retirement, cited by 71 per cent of IFAs. Two in five (40 per cent) favoured multi-manager funds (funds of funds) while 20 per cent preferred diversified growth funds.

Patrick Connolly, financial adviser at Chase de Vere, agrees largely with the findings of Barings' survey, stating that multi-asset funds have 'a role to play' for those looking to manage portfolio risk and generate an income. However, he says that investors should choose their funds carefully.

'It would be a mistake to think that one multi-asset fund is necessarily like another. With an increasing number of products now being promoted, it is important for investors to recognise that they can differ significantly in terms of approach, risks, charges and performance and so you need to pick the wheat from the chaff.

'For those with larger pension a pot, the best approach is likely to be a mix of investments specifically tailored to their individual needs and reviewed on an ongoing basis. Those who aren't confident making these decisions themselves should take independent financial advice.'


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