Partner Insight: Flora Maudsley-Barton, managing director of Parsonage Financial and Kerry Nelson, managing director of Nexus Financial met in London recently to discuss decumulation.
In the final video of the series (see above), Flora Maudsley-Barton and Kerry Nelson talk to Julian Marr, Editor of Professional Adviser about how pension savers can withdraw adequate sums of money from their pension pot to fund their desired retirement lifestyle.
There are different ways you can fund your retirement living from buying an annuity, preferably inflation-linked, carrying out a minimum drawdown or the self-insurance approach (pick some advanced age which becomes your goal for your lifespan) and invest the pot with the appropriate combination of growth and risk.
Flora Maudsley-Barton says: "At Parsonage, we have three income portfolios populated with income units, we like natural dividend yield. When the client's need exceeds the dividend yield, if there is profit available, we will take that to prop it up, and we try to do that in advance."
Nelson talks about her approach to decumulation: "[My clients] understand that a little more risk sustains the capital value, and their income. So that is one of the driving forces before we take the income. For example, we can have a growth income portfolio and still feed an income from it depending on what tax wrapper it is in.
"If we are then looking for decumulating for income, I will always start by saying to the client, ‘this is the natural dividend yield from the FTSE All Share, this is the sensible expectations that you should have, and this is the level of income you should be drawing on a regular basis'.
"We at [Nexus] will help make that happen, whether it be on a half-yearly, quarterly basis. If you are just relying on a natural dividend, that is quite sporadic in its payment. So we try and provide some regularity to that income. So we don't always rely on a growth income portfolio per se, it really is down to how that client wants to decumulate, and in what tax wrapper."
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