Schroders Retirement Thought Leadership series

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Picture their perfect retirement

Schroders Retirement Thought Leadership series

A series of thought papers to help you enhance your retirement journey

 
Minimum cost-of-living
£16,300

In 2014, single people needed to earn £16,300 a year before tax to afford a minimum acceptable standard of living. Couples with two children needed to earn £20,300 each.1

Annual household spend
£26,899

Average annual total household spending (ONS Family Spending 2014 Edition Release).

Life expectancy

Life expectancy at birth, on average in 2010/1 in the UK.2

Average UK care home costs
£28,500

On average you can expect to pay around £28,500 a year in residential care costs, rising to over £37,500 a year if nursing care is necessary.3

What kind of lifestyle
do you want?
icon £? Dining out with friends
icon £? A few weeks in the sun
icon £? Home improvements
icon £? Hobbies and/or health clubs
How will you generate income for years to come?

From 6 April, there will be three options available to individuals taking benefits from their money purchase fund for the first time:

Pension pot

25% tax-free
lump sum

'Drawdown’ where pot invested and income is taken

Annuity

Full or gradual withdrawal of money which will be taxed as income

Individuals will also be able to choose any combination of the above.
From April 2015, there will be no cap on the amount of money savers can withdraw in a drawdown scheme.

1
Flexi-access drawdown – this is the new form of income drawdown which will allow individuals to take taxable income from their pension fund with no upper limit.
2
Purchase a lifetime annuity. Under the new rules, lifetime annuities will be able to go down as well as up.
3
Taking one or more lump sums from uncrystallised funds, known as uncrystallised funds pension lump sum (UFPLS).
Ability to actively invest for income
Potential for income growth
Can I pass on capital if I die (subject to tax)?
Will I have a guaranteed income for life?
Is my income safe if markets fall?
Can I be sure I will always have an income?
Income
drawdown
yes
yes
yes
no
no
yes
Taking
lump sums
yes
yes
yes
no
no
yes
*Conventional
(Level) Annuity
no
no
no
yes
yes
no
Inflation
Linked Annuity
no
no
no
yes
yes
no
Scroll across to see the other categories

*There are other annuities to consider, which are not covered in this comparison. For further information it is important to seek independent financial advice before taking decisions on your retirement income.

When designing the new Schroder Global Multi-Asset Income Fund, the needs of the newly empowered generation approaching retirement have been at the forefront of our minds.

Schroders Retirement Thought Leadership series

The fund has a flexible multi-asset approach that addresses the key drivers of sustainable income: quality, diversification and liquidity. It leverages opportunities across asset classes, regions and sectors on a global basis, providing diversification and access to sustainable sources of attractive yields.

Rising to the income challenge

The Schroders Retirement Thought Leadership series has been designed to help investors seeking income in the current low growth, low yield environment where traditional sources of income can no longer fulfil their requirements. It aims to provide an attractive, regular and sustainable income without a correspondingly heightened exposure to risk.

The Schroder Global Multi-Asset Income Fund could provide a complete income solution for a broad range of investors. For example:

icon
Retirees who are seeking an alternative to purchasing an annuity.
icon
Investors who require a consistent income, for example to help fund education.
icon
Pre-retirees and other investors who are seeking to build capital with a moderate level of volatility, who can invest through an accumulation share class.

Targeting a clear outcome

The fund has three objectives:

1. To provide

A regular and sustainable income of 4‑6% per annum, which can be paid monthly or accumulated within the fund.

2. To generate

A total combined return of 7% per annum.

3. To deliver

These returns with volatility in-line with a risk rating of 4 on a scale from 1-7.

These target figures will be reviewed on an ongoing basis to ensure that market conditions continue to make them achievable. Please note that they are not guaranteed.

A proven strategy

The Multi-Asset Team at Schroders has extensive experience of managing global multi-asset income assets and currently has over £4 billion invested on this basis globally.

The fund will follow the same strategy as the Schroder ISF Global Multi-Asset Income Fund, a Luxembourg registered fund which was launched on 18 April 2012.

Track the performance of the ISF Global Multi-Asset Income Fund to date

The fund is co-managed by Aymeric Forest and Iain Cunningham.

Aymeric and Iain are supported by a team of global income specialists who in turn benefit from the input of more than 200 investment professionals with specialist expertise in different areas and asset classes.

Aymeric Forest

Aymeric Forest

Lead Fund Manager

Years
investment
experience
18

Overview

Head of Multi-Asset Investments. He joined Schroders in 2011 as a fund manager within multi asset. He is the lead manager of the Luxembourg registered Schroder ISF Global Multi- Asset Income, a member of Schroders’ Global Asset Allocation Committee and Volatility Risk Premia group leader.

Qualifications

Masters degree in Finance, Nancy 2 University (France), Giessen (Germany) and Lund (Sweden).

Iain Cunningham

Iain Cunningham

Co-Fund Manager

Years
investment
experience
7

Overview

Iain is responsible for the management of a number of multi-asset mandates focused on income and dynamic asset allocation. He joined Schroders in 2007 as a graduate trainee and specialises in currency and commodity research. He is a member of Schroders’ Strategic Investment Group Multi-Asset (SIGMA).

Qualifications

Masters in Economics and Finance and a Bachelors in Economics from Loughborough University.

play video

60 seconds with Iain Cunningham

Iain Cunningham, Multi-Asset Fund Manager, explores possible challenges for investors in 2015 and the global, flexible and unconstrained strategies his team are employing to take advantage of opportunities.

Investing in the fund

Fund literature

Please contact broker sales support on 020 7658 3894


*Please note that for your security, calls to Schroders may be recorded.

The fund managers’ six principles for income investing:

1

Be careful when investing in passive income products

Investing in generic income products like ETFs can result in unnecessary exposure to avoidable risks. Income-focused equity ETFs can be highly concentrated in a small number of sectors, such as utilities, leaving investors exposed to regulatory risk. We believe investors should pursue more bespoke strategies.

2

Pursue a diversified approach

Investing in single asset classes for income can leave investors exposed to the specific risks inherent within those asset classes. Whether it is market risk in equities, liquidity risk in high yield debt or the political risk inherent in emerging market debt, these risks can lead to meaningful underperformance by particular asset classes. Investing across a spectrum of asset classes can help to diversify these risks with the potential to produce superior risk-adjusted returns.

3

Focus on higher quality assets with sustainable income

One of the biggest risks in investing is the risk of permanent capital loss. Investing in higher yielding securities without paying attention to the security issuer’s future ability to pay dividends or meet coupon and principal payments, risks permanent capital loss. We believe it is imperative to focus high quality securities that are able to sustain and grow their income.

4

Take advantage of opportunities globally

Investors who are geographically restricted, for example by focusing too narrowly on their home market, have a reduced opportunity set compared to those investors who invest globally. Assets in certain regions can be expensive at points in time, while assets in other regions can simultaneously be cheap. Investing globally means you can take advantage of opportunities in different regions whenever they present themselves.

5

Be flexible and unconstrained

Different asset classes offer value relative to other asset classes at different points in the economic cycle. A flexible and unconstrained approach should be taken when managing exposure to different income sources. This allows you to take advantage of relative value opportunities in different asset classes, styles and market cap size over time.

6

Analyse risk and manage it carefully

It is important to take into account liquidity risk to ensure that assets can be bought and sold with ease. It is also important to understand the amount of risk being taken and to examine how your portfolio will perform in different market environments. We believe an active approach to risk management, in order to understand the sources and portfolio implications of different types of risk, can assist in protecting a portfolio during turbulent markets.

What are the risks?

  • The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.
  • The government or company issuer of a bond might not be able to repay either the interest or the original loan amount and therefore default on the debt. This would affect the credit rating of the bond and, in turn, the value of the fund.
  • Investment in bonds and other debt instruments including related derivatives is subject to interest rate risk. The value of the fund may go down if interest rates rise and vice versa.
  • The fund may invest in higher-yielding, or non-investment grade, bonds. The risk of the issuer defaulting on the capital repayment is higher than with investment grade bonds.
  • The fund can use derivatives for investment purposes. These instruments can be more volatile than investment in equities or bonds.
  • Potential investors in emerging markets should be aware that this can involve a higher degree of risk.
  • The fund holds investments denominated in currencies other than sterling, changes in exchange rates will cause the value of these investments, and the income from them, to rise or fall.
  • The income and capital growth targets are estimates and not guaranteed.

Further reading

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