Generating reliable retirement income has become one of the biggest balancing acts facing advisers today. Clients want sustainable withdrawals, inflation protection and flexibility, but without taking on unnecessary levels of risk or sacrificing peace of mind.
In this exclusive feature, Ian Cook, Chartered Financial Planner at Quilter Cheviot and James Flintoft, Head of Investment Solutions at AJ Bell, provide their thoughts on managing risk and how volatility can prompt a shift in strategy to ensure reliable income for clients.
As volatility, inflation and interest rates continue to reshape markets, investment providers are increasingly moving away from rigid income rules towards more flexible and diversified approaches. Across the board, one message is becoming clear: chasing headline yield alone is no longer enough.
Reliable income needs balance
For James Flintoft, Head of Investment Solutions at AJ Bell, generating sustainable income starts with diversification rather than simply searching for the highest yields available.
“When investors need income, the temptation is to chase yield” he explains. “A better starting point is to think about total return and diversification.”
Flintoft believes bonds and equities now play increasingly complementary roles within retirement income portfolios. Bonds can once again provide meaningful contractual income, while equities continue to offer dividend growth and longer-term inflation protection. “That is why the answer is not to rely on any single source of income,” he says. “A reliable income is therefore less about finding the highest headline yield and more about combining asset classes sensibly.”
Ian Cook, Chartered Financial Planner at Quilter Cheviot, agrees that advisers are becoming more flexible in how they approach retirement income planning. “Advisers are increasingly moving away from rigid income rules towards more flexible, cashflow-led approaches that can respond to changing market conditions,” he says.
For Cook, one of the most important developments has been separating short-term income needs from long-term growth capital. Holding near-term withdrawals in lower-volatility assets or cash equivalents can reduce the need to sell growth assets during market downturns, helping mitigate sequencing risk.
At the same time, both Flintoft and Cook believe guaranteed income solutions are beginning to regain popularity. Higher interest rates have improved annuity pricing considerably, encouraging more blended retirement strategies that combine secure income with flexible drawdown.
Cook notes there has been a “noticeable shift back towards incorporating guaranteed income where appropriate”, helping create “a baseline level of certainty while still allowing portfolios to participate in market growth”.
Volatility is reshaping income strategies
The sharp rise in interest rates over the past few years has materially altered the retirement income landscape and changed how providers are positioning portfolios for advisers and their clients.
Flintoft says the bond market reset following 2022 has allowed bonds to once again play a much more central role in portfolio income generation. “Government and corporate bonds can meet more of an income objective without forcing investors as far up the risk spectrum, or into Alternative assets as they did throughout the 2010s,” he explains.
He also points out that providers are increasingly looking for opportunities within shorter-dated government bonds and credit markets, particularly as yields have become more attractive than they were during much of the post-financial crisis era.
Meanwhile, Cook says providers and advisers alike are increasingly focusing on resilience rather than simply maximising yield. Inflation uncertainty and ongoing volatility mean retirement strategies now require greater flexibility and more regular reviews. “Regular reviews, dynamic withdrawal strategies and a clear understanding of essential versus discretionary spending are critical to maintaining sustainable income,” he says.
This flexibility is becoming increasingly important as retirement itself changes. Clients are spending longer in retirement, often phasing gradually into later life rather than stopping work abruptly, while many are also trying to balance their own spending needs alongside gifting and intergenerational wealth planning.
Where income strategies can fall short
Both contributors warn that income strategies are most vulnerable when investors become overly focused on headline yield or unrealistic withdrawal assumptions.
“Income strategies are most likely to fall short when investors focus on headline yield rather than the income that is actually available,” says Flintoft. He warns that both bond and equity income can appear more attractive on paper than they prove in reality, particularly where investors over-concentrate on riskier assets or unsustainable dividend yields.
Cook also warns that volatile markets can quickly expose weaknesses in poorly structured retirement plans, particularly where withdrawals are set too high from the outset. “Early losses combined with withdrawals can significantly reduce the longevity of a portfolio, ” he says.
Inflation also remains a major challenge, particularly for clients relying heavily on fixed nominal withdrawals over long retirement periods.
Flexibility is becoming essential
Ultimately, both contributors believe successful retirement income planning increasingly relies on diversification, flexibility and ongoing advice rather than static, one-size-fits-all solutions.
For advisers, that means retirement income planning is becoming less about finding a single “best” strategy and more about building resilient, adaptable portfolios capable of supporting clients through changing market conditions and changing life circumstances alike.
As retirement planning grows increasingly personal and complex, the ability to blend income sources, manage behavioural risks and adjust strategies over time may prove just as valuable as investment performance itself.
About Ian Cook
Ian has worked in financial services since 2002, following a career change after leaving the British Army. His core strengths are taking complex financial matters and putting them in plain English. Ian has developed his range of skills to incorporate full financial planning using cash flow and lifetime income modelling. Ian is featured regularly in the national and broadcast media, providing clients with help and guidance on personal finance issues. He has appeared on the likes of ITV and LBC, giving his tips and advice on how people can manage their money in an effective manner.
About James Flintoft
James joined AJ Bell in January 2023 as a Fund Manager and has over a decade of experience managing multi-asset and equity portfolios. He spent several years as an Investment Associate, managing portfolios and providing research on UK equities, funds and global markets, before going on to serve as Head of Portfolio Management and later Head of Investments for a regional DFM. James is a CFA charterholder and has a degree in Finance & Investment Management.
