APPROACHING
Investment strategies
at retirement
Until relatively recently, for the majority of people there was only one
investment strategy at retirement – they bought an annuity, which provided
them with a secure income until they died.
However, the liberalisation of the pension rules
that came into effect at the start of May has
brought a vast new range of options for retirees.
Inflation should be one of your main considerations
over a 20- to 30-year retirement. Although the past
few years have seen a relatively benign inflationary
environment, the effects of inflation compounded
over time consistently destroy wealth.
This means that at retirement, an investment
portfolio should include growth assets such as
shares.
The shape of that portfolio will vary depending on
your appetite for risk, but it should be diversified
across different geographical regions, company sizes
and investment styles such as value and growth. It
should also, to some extent, reflect current market
conditions and where the best opportunities are to
be found.
You will also need to decide whether you will need to
generate an income from that portfolio. Here, again,
growth will be important. A fixed income may be
considerably less valuable in 20 years’ time, whereas
an income that grows in line with inflation – such as
that from share dividends or lettings income from
property – should retain its value.
In building an investment portfolio at retirement,
there are some key rules:
Holding a spread of assets is important to
reduce risk and you also need to look to the
long-term, which means not being scared of
stock market volatility.
Perhaps most importantly, you need to be
aware of the corrosive effect of inflation and
be willing to adjust your portfolio as your needs
change over time.
Key points
It makes sense to include alternative
retirement options now there is the flexibility
to do so
Inflation is a major threat over a 20- to 30year retirement, so your portfolio should
include growth assets such as shares
Your portfolio should be diversified across
geographical regions, company sizes and
investment styles
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