St James’s Place has confirmed charges on its new trio of decumulation portfolios will mirror those on its existing fund range.
On Wednesday, SJP revealed it was launching the InRetirement fund range for clients seeking a regular income during retirement with State Street Global Advisors (SSGA) acting as the outsourced investment manager on the trio of products. It will be responsible for rebalancing the underlying funds, cash flow management and currency hedging.
The Prudence InRetirement fund will have the least investment risk, while Growth InRetirement will have the highest, while the Balance InRetirement fund sits within those two profiles. They launch on 21 September.
An SJP spokesperson confirmed charges on the three funds will work in the same way as its existing range. “So for example the total annual charge if they are held in a unit trust or Isa for ongoing advice, administration and all investment charges for clients using these funds is 1.50% p.a. for Prudence InRetirement, 1.56% p.a. for Balance InRetirement and 1.66% p.a. for Growth InRetirement.”
SSGA CIO for investment solutions Dan Farley said the InRetirement range combined SJP’s asset allocation and fund selection process with his firm’s experience in managing multi-asset retirement portfolios.
SJP director for investment management Rob Gardner (pictured) described the next decade as “the decade of retirement” highlighting that people are now living on average into their mid eighties, compared with a life expectancy of 38 years at the start of the previous century.
The question for retirees is how to turn their savings into an income stream that can keep up with inflation, Gardner said. “A comfortable income today may not be enough in 10, 20 or 30 years’ time.”
In a press release, he said the solution is best achieved through “an advice process that specifically focuses on mitigating the risks in retirement supported with goal-based planning tools, and access to an investment solution that has been purpose-built to deliver an inflation-proof income stream in retirement”.
The lack of decumulation products for people approaching retirement has been an increasing concern for the Financial Conduct Authority as responsibility for retirement savings falls increasingly on individuals, following the pensions freedoms, and away from defined benefit pension schemes. It has put the onus on the investment industry to develop more products to cater to this gap in the market.
AJ Bell is among the most recent firms to launch a decumulation service with a portfolio that it said would be able to withstand a withdrawal rate of 4% in the first year and adjusted for inflation in subsequent years.
Parmenion touted itself as the first DFM to create a decumulation product with its Guardian drawdown portfolios launched in May 2016. Copia launched decumulation products using iShares ETFs in March 2017 and Thesis, which is now part of Sanlam, launched a product in March 2018.
In April, Dynamic Planner officially launched risk ratings for decumulation products for the first time with UBS and JP Morgan Asset Management among the first managers to sign up to have their portfolios scrutinised. Aviva and Aviva Investors, Columbia Threadneedle, Church House Investments, LV= and Royal London Asset Management have also got on board.
At the time of launch, Dynamic Planner said coronavirus market volatility had highlighted how decumulation portfolios were in a better position to sell much fewer units to meet investor income needs compared to accumulation products.
See also: DFMs failing to provide investment products for retirement
