For Good Pension Planning, Balance Risk With Reward
Personalisation is a watchword in pension management with Zurich Life, particularly when it comes to navigating a low-interest rate environment. Niall Fitzgerald, Head of Retirement Solutions, says that Zurich has a number of investment strategies available to help clients choose the right pension.
“Retirement is very individual, so the earlier the conversations start the better prepared the individual will be. Traditional annuities are not very popular at the moment due to the low interest rate environment. However, they may serve a purpose later in retirement when the income requirements for the individual may change.
“We have designed a strategy that tries to balance investment risk with reward, giving the individual’s money the potential to grow while not overly exposing it to the volatility of investment markets. RetireRight is an investment strategy that can automatically do this for individuals. Then, when the time comes, it allows the individual to invest in an annuity if it is more appropriate for them. If not, the strategy will have reduced their volatility on their behalf, offering them peace of mind.”
Another option provided by Zurich Life is GuidePath, which Fitzgerald says caters for different risk profiles and retirement benefit plans. “At the heart of a personalised GuidePath is an automatic process that gradually moves an individual’s money into less risky investments, as they move towards their chosen retirement age.”
Fitzgerald is cognisant of the pressures currently being exerted on businesses due to the Covid-19 pandemic, although he cautions against shelving pension payments. “My advice to any business owner is not to treat pensions as a nonessential cost within the business. By all means consider affordability in 2020 but always remember the purpose of pensions is to provide replacement income in retirement, and the importance of this can never be understated.
“Many self-employed people will still look to make single contributions to their pension to help reduce tax bills, and advice from a financial broker is essential before any final decisions are made.”
In relation to auto-enrolment, Fitzgerald argues that it is not the silver bullet that some think it is. “Auto-enrolment will benefit later generations, assuming target contributions are achieved. However, it won’t fix the issue for the current generation nearing retirement, who will have to rely on the State Pension as their primary pillar of income in retirement and any subsequent retirement savings thereafter. So the impact of when AE is introduced is
Niall Fitzgerald, Zurich Life
not such an issue now. What is very important is that AE is introduced when employers can cope with it.
”Pension benefits are deferred income, and by setting up an employee benefit structure it is easier to get more engagement from employees. Every decade of delay doubles the cost for the same amount of benefit at retirement. At the end of the day though, it comes down to company budgets and affordability.”