Jasper Berens, head of UK Funds at JP Morgan Asset Management, and Simon Chinnery, head of the UK defined contribution business, comment on how both funds and advisors can position themselves to meet the forthcoming changes to the pensions regime.
Jasper Berens, Head of UK Funds, J.P. Morgan Asset Management:
“UK investors post-Budget will have a lot more autonomy around how to control and direct their retirement savings – and financial advisers will need to be ready. As an industry, it’s critical that we get this right. And consequently, quality financial advice has never been more important.
“With greater flexibility comes the prospect of greater challenges for retirement investors. [Under the new regime] they’ll need to carefully manage risk to prevent against the potential loss of future wealth – whilst at the same time accessing competitive market returns to grow their assets in order to sustain their lifestyles through retirement.
“The increased flexibility with which assets can soon be taken from a defined contribution pension means that many traditional investment options will be rethought. Given the basic need for sustainable income throughout retirement, there is a desire for solutions able to provide compelling risk-adjusted returns, balancing the provision of sustainable income and management of downside risk with a strong focus on capital appreciation.”
Multi-Asset Income Funds
“From April 2015, the investors who used to have to buy annuities may instead be well served by multi-asset income funds that are (i) easy to understand; (ii) accessible; and (iii) lack complex and expensive guarantees. And advisers for their part will need to be poised to help clients navigate their options in the new investment landscape.”
Berens goes on to describe how his own JPM Multi-Asset Income Fund might perform as a suitable vehicle. The fund, he says, “looks beyond a simplistic balanced allocation to equities and bonds” with a “dynamic pursuit of yield [which] produces consistent, competitive income.” The fund, he says, adopts a global flexible approach “invested across a range of distinct strategies, comprising over 1,500 securities across 50 countries” to create what he calls a ‘go anywhere’ approach – thus allowing the fund, he says, to deliver solid income ideas “while also maintaining the risk profile of a traditional balanced fund (60% equity/40% bond).”
“I think we’ll see a rising need for this type of multi-asset income driven approach,” says Berens. “It offers the potential to build and preserve wealth, beat inflation and reduce the risk of outliving one’s assets. These strategies are able to provide the income that is needed along with the growth and diversification that is prudent for income investors.”
A Managed Withdrawal Approach Is Essential
Simon Chinnery, Head of UK Defined Contribution, J.P. Morgan Asset Management, adds that the business of getting it right for tomorrow's pensioners will involve more than just fund expertise. Much emphasis, he says, will fall on the withdrawal framework that many pensioners will employ in th future. "These more flexible solutions can help advisers to better address their clients’ retirement funding needs, whilst helping them avoid the expense of costly annuities.”
We couldn't disagree with a word of that.