Retirement income planning has always been a major part of financial planning, but for many advisers, the conversation has become noticeably more complex over the past year.
For this exclusive combination piece, Craig Palfrey, Founder of Penguin Wealth, Matt Wood, Managing Director at AMFA, and David Batchelor, Founder of Wills & Trusts Partnership Ltd, shared how they are approaching retirement income planning in the current environment and where they believe adviser value increasingly lies.
Higher interest rates, market volatility and looming inheritance tax changes for pensions are all reshaping the way firms think about decumulation. At the same time, clients themselves are changing. More are phasing gradually into retirement, more are prioritising lifestyle spending earlier in life, and many are wrestling psychologically with the shift from building wealth to actually using it.
For advisers, that means retirement planning is becoming less about applying a standardised withdrawal strategy and more about balancing technical expertise with behavioural coaching, reassurance and flexibility.
Balancing guaranteed income, drawdown and invested assets
Retirement income planning is becoming increasingly personalised, with guaranteed income, drawdown, cash reserves and invested assets blended according to the needs and behaviours of individual clients rather than following rigid rules.
For Craig Palfrey, the starting point remains understanding what clients actually want retirement to look like. “When we build retirement income plans, we still start in the same place we always have: what does the client actually want their money to do for them?” he says.
Palfrey believes advisers risk overreacting to policy changes and market headlines at the expense of core financial planning principles. “I think there’s a danger in our profession of overreacting to headlines or tax changes and suddenly behaving as though the fundamentals of good financial planning have changed overnight. In reality, they haven’t.”
Rather than treating guaranteed income and invested assets as competing approaches, he says firms should blend solutions appropriately. “For us, it’s rarely about choosing between guaranteed income, drawdown, cash reserves or invested assets. It’s about blending them appropriately for the individual/family sitting in front of you.”
Cash reserves still play an important role, particularly when managing volatility and maintaining long-term growth assets. “We still typically hold sensible cash reserves for short-term spending needs and volatility management, whilst ensuring longer-term assets remain invested for growth and inflation protection.”
Palfrey also rejects the idea that annuities have fundamentally changed because of the recent interest rate environment. “I also don’t think annuities suddenly became ‘good’ or ‘bad’ because of recent changes. They’ve always had a place for the right client in the right circumstances.”
Matt Wood says the recent retirement income review reinforced concerns many advisers already had around applying accumulation thinking directly to decumulation planning. “Accumulation logic does not translate cleanly into a decumulation conversation,” he says.
Wood explains that his firm first establishes what level of secure income clients already have before deciding what the invested portfolio needs to achieve. “Between the state pension, any defined benefit entitlement, and in some cases an annuity, the bulk of essential expenditure is often already covered, which changes quite a bit about what the invested portfolio has to do.”
Once those core income needs are covered, Wood says retirement planning becomes more focused on flexibility and sustainable withdrawals. “With that floor in place, the right answer for us blends natural yield, cash buffers, controlled drawdown, and a continued allocation for growth.”
He adds that the emotional transition into retirement remains critically important. “The most important aspect, though, is the client’s emotional journey. Our approach lets a client used to a regular salary transition comfortably to an income generated by the portfolio.”
Meanwhile, David Batchelor believes many technical retirement planning questions are becoming increasingly easy to answer through technology and AI. “Most people think it’s about what should I draw on? What is the most tax-efficient route? Do I need income guarantees? How will I be affected by the age 75 issue on pensions? And 100 other similar questions. But these are all simple to answer.”
Instead, Batchelor argues advisers increasingly need to focus on relationships, reassurance and leadership. “No client has ever come back to me after 10 years in retirement and said, ‘Thank you for minimising my tax’. But I have had hundreds say, ‘You told me it was all going to be ok and that I could fly business class, and I am grateful for that’.”
The emotional challenge of moving into decumulation
While retirement income planning is often viewed through a technical lens, the emotional and behavioural side of decumulation remains one of the biggest challenges clients face.
Palfrey says many retirees struggle psychologically with the transition from saving wealth to spending it. “The biggest challenge we see when clients move from accumulation to decumulation is rarely technical — it’s psychological.”
He explains that decades of saving behaviour can be difficult for clients to reverse. “Many clients spend 30 or 40 years being conditioned to save, build and protect wealth, so switching mentally from ‘don’t spend it’ to ‘this is what it’s for’ can be incredibly difficult.”
Even where cashflow modelling demonstrates clients can afford to spend more comfortably, many remain heavily focused on preserving capital. “The biggest issue we encounter is anxiety around seeing capital reduced, even when the plan clearly demonstrates they can afford to spend more.”
As a result, advisers increasingly find themselves helping clients feel comfortable enjoying the wealth they have spent decades building. “Increasingly, part of our role is giving clients permission to spend.”
Wood agrees that mindset becomes one of the defining challenges within decumulation planning. “Mindset is probably the hardest part, and not just for the client. Accumulation is largely one conversation about growth over time. Decumulation is a different set of questions.”
He says sequencing risk becomes particularly important during the early stages of retirement. “Early losses do more lasting damage than the same losses later on, and clients rarely feel that risk until you put it in front of them on a cash flow.”
That shift has influenced the way his firm approaches suitability and risk profiling. “We moved attitude to risk and capacity for loss away from a fairly expensive legacy provider to Mabel Insights, which is free, technology-focused, and built around a more retirement-focused ATR.”
Wood also stresses the importance of consistency across adviser firms. “Every adviser needs to be having the same conversation, working from the same assumptions, and landing in the same defensible position.”
At the same time, he notes that retirement itself is changing. “Working patterns are changing, with more people phasing into retirement, so it is becoming less common for a client’s income to stop at a single point in time.”
For Batchelor, the profession increasingly needs to recognise where long-term adviser value truly lies. “The best advisers understand that within 18 months, if not sooner, clients will answer these factual questions by pumping a question into AI.”
Instead, he believes the future of retirement advice will centre more heavily on relationships and reassurance. “The best advisers focus on where they bring value to clients, with that value being in the client’s eyes .”
Rethinking wrapper sequencing and withdrawal strategies
The upcoming change to inheritance tax treatment of pensions from April 2027 is also beginning to reshape conversations around withdrawal sequencing and legacy planning.
Palfrey says firms still need to focus on the client’s wider circumstances rather than reacting solely to tax changes. “When deciding which assets or wrappers clients should draw from first, we still believe the starting point should be the client’s overall plan and family situation, not simply reacting to the latest tax headline.”
Despite the proposed inheritance tax changes, Palfrey still sees pensions as highly valuable planning tools. Rather than applying blanket withdrawal rules, he says firms increasingly need to assess the wider family and behavioural picture. “In practice, we look at the whole picture: income needs, health, family circumstances, other assets, legacy intentions, tax position and, importantly, behaviour.”
He also notes growing interest in intergenerational gifting conversations. “Increasingly, we’re also having conversations about clients helping family earlier where appropriate.”
Wood agrees that the pension inheritance tax changes are prompting advisers to rethink traditional assumptions around wrapper sequencing. “What has changed is the inclusion of unspent pensions in the estate from April next year.”
He says they increasingly focus on natural income strategies and reducing unnecessary asset sales during difficult market conditions. “Our default position is to limit unit encashment wherever we can. Natural income gives us a way of meeting a client’s income need without forcing the sale of assets in market conditions we did not choose.”
Wood also believes advisers are reconsidering the traditional approach of preserving pensions until last. “On wrapper order itself, the old received wisdom that pensions are the last pot you touch is being actively rethought.”
For Batchelor, the wider shift reflects a broader evolution in adviser value itself. “Going forward, we need to forget where we used to think we provided value and understand that AI will take this away from us.”
Instead, he believes successful retirement planning will increasingly revolve around relationships and confidence. “We all need to understand that the value to the client is understanding them, through building relationships, and giving them confidence by giving them leadership.”
Conclusion
Across all three adviser perspectives, retirement income planning is increasingly moving beyond simple tax calculations and withdrawal sequencing. While market conditions and regulatory changes continue to shape technical decisions, advisers are placing growing emphasis on flexibility, behaviour and reassurance. As decumulation planning becomes more complex, the ability to guide clients confidently through retirement may prove just as valuable as the underlying financial strategy itself.
By Jenny Hunter, IFA Magazine’s Deputy Editor.
About Craig Palfrey
Craig Palfrey is the Founder of Penguin Wealth, a Financial Planning firm built on a simple belief: financial advice should be as much about people as it is about money.
Based in Cardiff (and proudly speaking at what he describes as “Welsh speed”), Craig has spent over two decades helping families not just grow their wealth — but keep it.
About Matt Wood
Matt Wood is Managing Director of AMFA, an IFA business managing around £600m for over 2,500 clients through a sizeable adviser team. His work centres on operational scale, the disciplined adoption of technology and AI, and the consistent, defensible delivery of advice at volume.
About David Batchelor
David is the Founding Partner of Wills & Trusts Partnership Ltd, which began as an adviser firm in 1992, but now brings together an independent financial adviser and an accounting firm.
Previously President of the Life Insurance Association, David co-founded the Personal Finance Society, of which he was a director for several years. The Society is now a pillar of the financial services profession.
