Investing Your Fund Post Transfer

The Importance of Specialist Investment Advice

Post transfer the client will have the option (assuming the monies are not going to another Final Salary Scheme) to move the transferred sum into an existing money purchase scheme, such as a personal pension. If no scheme exists then it is likely that setting up a new arrangement will need to take place using, for example, a Self Invested Personal Pension.

 

The transferred pension money is now sitting in the existing or new arrangement and for many, having possibly made the biggest financial decision in their life (some transfers representing values of greater worth than the investor home), and so going forward it is absolutely vital that the investment strategy for the pension scheme matches the clients retirement aims and objectives. 

 

The investments made will need to generate sufficient returns after fees and inflation to make the transfer a worthwhile choice compared to the guaranteed income they will leave behind and they need to do this with as much certainty as possible.

 

They will also need to be matched to the client’s personal objectives in terms of their planned income withdrawals along with the ability to tolerate short term fluctuations in the portfolio’s value, against the client’s attitude to investment risk.

 

It is taking into consideration all of the above that at Sancus Retirement Planning we have adopted what we call our Centralised Investment Process.

 

Let us look at why we do this?

 

There is no doubt that the financial advice landscape has undergone huge transformation in recent years. One of the biggest game-changers was the introduction of the pension freedoms in April 2015, which handed clients greater financial flexibility in their retirement.

 

Firstly, demand for advice is growing exponentially. Before the pension reforms, most clients would have bought an annuity at retirement. Now, many clients are likely to stay invested and use the freedoms to take a flexible income. This means more and more clients coming back each year to revisit their retirement options and requiring on-going dialogue over the long term.

 

Secondly, retirement advice is increasingly complex. With more clients choosing to go into drawdown, making judicious investment choices throughout the retirement journey is critical; not just with their pension pot, but with the full suite of retirement investments at their disposal. At the same time, clients in drawdown bring additional technical investment challenges including managing risk and volatility, implementing a withdrawal policy, and ensuring the sustainability of income.

 

Tax and estate planning add another layer of complexity, meaning that clients will need advice to utilise a wider range of tax wrappers than before to satisfy clients’ income needs in retirement. And with pensions now at the heart of estate planning, we have greater responsibility and accountability to the next generations of clients.

 

These incredibly important changes help Sancus Retirement Planning remain focused on helping clients achieve their financial goals and a comfortable retirement - so we would question a traditional advisors approach to looking after investment funds in retirement with the adviser picking and choosing individual funds. It is our view that when dealing with Final Salary Scheme transfer proceeds, a more sophisticated approach is necessary.

 

Building a Centralised Investment Process for those at retirement

 

A solution for most pension transfer specialists is to develop a Centralised Investment Process (CIP) and, as part of that, to outsource the investment management responsibilities to a discretionary fund manager. This is no different for Sancus Retirement Planning.

 

What does it look like and why do we do it?

 

Three pillars of a successful CIP 

• Investment policy

A clear investment policy for ‘in retirement’ clients is crucial to minimising risk. The nature of investment risk in retirement and when money is being withdrawn is very different to when wealth is accumulating and being invested for growth. 

• Withdrawal policy

If a client chooses the drawdown route, there is a real risk of them outliving their retirement savings. A withdrawal policy sets realistic client expectations at the outset about how much income their portfolio may provide. Having a clear plan should reduce the chance of clients being unnerved when markets are volatile. 

• Tax policy

A tax policy framework helps establish repeatable processes which aim to provide a tax efficient income for clients in retirement, and possibly their successors. 

 

Outsourcing investment responsibilities 

Whilst Sancus Retirement Planning have the personnel within the firm who meet the FCA criteria to manage money as recognised investment fund managers, in the new retirement landscape, maintaining in-house investment management is now a struggle to cope with when dealing with the increased burden of administration and the far more technically challenging client meetings of today. That is on top of the required rigorous investment research, constant portfolio rebalancing and not to mention the additional complexities of investing in the drawdown phase. It is taking all of this into account that we believe delegating this responsibility to a Discretionary Fund Manager is in our clients best interest long term. 

Why is it so important to get the investment strategy right and what are the risks once you come to take income……………..”after all, what could go wrong??!!??”:   

 

• Withdrawal risk – you take out too much at the wrong time 

• Inflation risk – steady increase mean you need to take out more than is being earnt 

• Longevity risk – you live too long 

• Flexibility risk – it’s a pension bank account – I can take out what I like 

• Market risk – 1987, 1998, 2008? 

 

It is for that reason that we recognise the benefits of outsourcing these responsibilities to a specialist investment manager, as working in partnership with a skilled discretionary manager can be a powerful combination for a client; providing expert planning and relationship management, alongside specialist investment expertise.

 

Due diligence when selecting a suitable discretionary fund manager is crucial to our advice process, so when making that decision the clients objectives and needs have to be aligned to the style and investment strategies of the DFM. 

 

Whilst the discretionary fund managers are growing your money, Sancus Retirement Planning is protecting your investment by managing the investment managers on your behalf. Those on our approved panel are invited to make a formal presentation to Sancus Retirement Planning Limited on a regular basis to discuss past performance and future investment strategies. 

 

It is with all of the above in mind that at Sancus Retirement Planning we have put in place a Centralised Investment Process specific to those in retirement, making sure all of our clients receive an absolute hands on service once monies are moved into the new pension arrangement.

 

Please contact info@sancusrp.co.uk for more information, help and guidance on our Final Salary Transfer Advice Service.