Retirement planning: can smoothed funds offer a PROD in the right direction?

by | Jan 13, 2022

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Through different stages of retirement planning advisers will need to consider different solutions for their clients. The fundamental difference between accumulation and decumulation strategies means that advisers need to construct a robust centralised retirement proposition in addition to a centralised investment proposition.

To help advisers and paraplanners to consider some of the typical stages of retirement, Pru has developed a useful guide entitled ‘The different stages of retirement planning’.  Using a case study approach, the purpose of the guide is neither to provide a definitive, all-encompassing guide to retirement solutions nor to make specific recommendations. Instead, it looks to suggest scenarios where the PruFund range may form part of an adviser’s centralised retirement proposition, and what type of clients it may be appropriate for with consideration to PROD rules and suitability processes.

The value of any investment can go down as well as up so your clients might get back less than they paid in.


Understanding PROD

The FCA’s Product Intervention and Product Governance (PROD) sourcebook refers to the systems and controls which firms have in place to design, approve, market and manage products throughout the products’ lifestyle to ensure they meet legal and regulatory requirements.

According to the FCA, good product governance should result in products that:

  1. meet the needs of one or more identifiable target markets;
  2. are sold to clients in the target markets by appropriate distributionchannels; and
  3. deliver appropriate client outcomes.

Of course, advisers have a crucial role to fulfil here in ensuring that they can deliver the best solution for each individual client.

Scenario planning

So how can advisers best support clients’ individual needs and attitudes at different stages of the financial planning process? It’s certainly a challenging but crucial part of the advice process.


Providing some support to advisers, Pru’s guide outlines some fictional but true to life scenarios.   These can help advisers and paraplanners to think about how the Pru proposition – including smoothed funds – could help meet clients’ demands and needs when it comes to retirement planning.

The examples in the guide reflect some of the different stages a typical pension client might present with. Obviously every client is different, so this is simply a case of trying to identify the more typical client type and consider some of the issues an adviser might consider in these circumstances.

The case studies consider scenarios of potential client situations across a wide range of client ages and life stages. They begin with an example of someone in their twenties, at the beginning of the accumulation phase of financial planning. The scenarios build by using an example of a thirtysomething female who is in a position to be able to consolidate pension assets. On the approach to the decumulation phase, there are many important factors for advisers to consider and to highlight to clients. Potential tax charges such as the lifetime allowance charge, are just one of these areas. Also the danger of sequencing of return risk, where losses are ‘crystallised’ when income is eventually taken from a SIPP and the volatility and potential for falls in the fund value when in income drawdown, is considered. Case study examples of a number of planning scenarios on the run up to retirement and in retirement complete the picture.


To find out more about PruFund, please click here

And you can access Pru’s guide in full here:  ‘The different stages of retirement planning’.

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