The art of decumulation

DFM business support
Views & insights

Designing a retirement spending strategy that ensures clients can achieve their desired lifestyle without running out of money has never been more challenging.


24 August 2021 | 3 minute read

The economic fallout of the Covid-19 pandemic is far from over, interest rates are at an all-time low, and inflation has risen above the Bank of England’s 2% target. At the same time, clients’ personal and family circumstances may have changed as a result of the pandemic, perhaps forcing them to reassess their retirement aspirations.

Now, more than ever, it is clear there is no ‘onesize-fits-all’ approach to decumulation. A successful retirement income strategy is individual to each client and must be able to adapt to their needs in an everchanging world.

Every client is unique

If there’s one thing the past 18 months have taught us, it’s that nothing in life is certain. No-one could have foreseen the impact of Covid-19 on the economy or on our day-to-day lives. Job and wage cuts may have pushed back or scuppered some people’s retirement plans, while others may have embraced a ‘phased’ approach to retirement after experiencing the flexibility of working from home.

Any of these scenarios could have affected clients’ decumulation plans, making it necessary to review and adjust as appropriate. In this review process, it’s important to realise that no two clients are the same. Their circumstances might be similar, but it is extremely unlikely they will have the exact same date of birth, the same state benefits, the same size pension pot, the same lifestyle, and the same relationship status, let alone the same aspirations for themselves and any possible future beneficiaries.

Once you dig deep into a client’s individual circumstances, it quickly becomes evident that an off-the-shelf solution is unlikely to be adequate. Opting for a tailored, bespoke solution ensures clients have a portfolio that matches their objectives and precise income requirements, thereby helping them to fulfil their unique retirement ambitions.

Taking a flexible approach

A client’s needs and objectives can change significantly throughout their life, including beyond retirement. Their goals might shift from travelling the world to preserving a legacy for loved ones, or they might develop a long-term care need in later life.

A decumulation strategy should be flexible enough to accommodate your client’s evolving requirements. A truly bespoke discretionary fund manager (DFM) will speak to the adviser and client on a regular basis to assess their current and future spending. They will look at whether the amount withdrawn last year was sufficient, or whether they ended up putting excess cash in a bank account. They’ll look at how much is left in the pot and, if appropriate, suggest reducing spending the following year so as not to deplete the pot too quickly.

Decumulation strategies also need to adapt to the shifting market backdrop. As we have seen over the past 18 months, share prices, exchange rates and commodity prices can swing wildly from one day to the next. DFMs usually have a team of experts whose job is to monitor and react quickly to market movements, thereby minimising the impact of sudden losses on the client’s portfolio.

Mitigating the risks

Although the stock market has largely recovered from the crash of March 2020, many people will have seen their pension values fall, at least temporarily. And the recovery hasn’t been without its setbacks, with investors seeing choppy swings up and down in the markets for much of last year.

In retirement, dips in the market can cause lasting damage to an investor’s portfolio. This is especially so in the early years of retirement, when falls in the market can result in portfolios being unable to meet lifestyle expectations over the long term.

The economic recovery is still uncertain, meaning clients could continue to see investment values move up and down over the coming months. A DFM will not only keep advisers abreast of what is happening in the market, but will also look for ways to mitigate risks in the context of the client’s individual risk profile.

During the pandemic, we have seen clients taking a keen interest in how their portfolios work, based on the advice their adviser has given them, as a key element of our review meetings. Part of that discussion has focused on how we can split the portfolio into the client’s short-term goals and employ an investment strategy to meet those goals – for example, using fixed-term investments to match planned redemptions with income liabilities. This can avoid the need to sell down investments in an unstructured manner.

We can then focus on using growth-oriented asset classes for the long term, seeking to offset investment risks like rising inflation and continued low interest rates, and helping the adviser and the client to continue to meet their goals and aspirations. The adviser then has time to focus on maintaining the quality of their advice to the client and optimising the client experience.

Working together

For anyone approaching or in retirement, the need for expert financial advice and investment management is greater than ever. Many people’s retirement plans are in a state of flux, and the road to economic recovery remains uncertain.

By partnering with us early on in the conversation, we can help to structure your clients’ investments and the income they take from them in the most effective way. We will work with you to create a bespoke retirement solution, which considers every element of your client’s unique tapestry. We’ll support you during the whole journey, with hands-on, practical help from our UK-wide Business Development Managers. You can then focus on what you do best: building and nurturing client relationships.

For more information on how we can help your clients fulfil their retirement aspirations, visit

This is for FCA authorised individuals only and should not be distributed in whole or part to retail clients. The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

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