The spectre of Trump-era tariffs has definitely led to periods of volatility this year. The Trump administration has created an environment which seeks to fundamentally alter the norms of world trade as we have known them for the last 50+ years.
It’s a timely reminder that for retirees drawing income, political headlines can quickly translate into financial headaches, as well as pose challenges for financial advisers who are helping them manage their retirement plans.
Retirement income, or decumulation, remains one of the most debated topics in the financial industry. The sheer variety of approaches, products, and solutions put forth by the industry to address this challenge is remarkable.
And yet, the fundamental risks retirees face remain unchanged:
- Inflation Risk – The erosion of purchasing power over time.
- Longevity Risk – The uncertainty of how long one will need income.
- Sequence of Returns Risk – Sometimes referred to as “reverse pound cost averaging”, underscores the damage volatile markets can inflict when withdrawals are made at the wrong time.
The Unique Challenges of Decumulation
Unlike accumulation, which generally follows a linear and goal-based path, decumulation can be a deeply personal and highly variable
decision. Some retirees may prioritise leaving a legacy for their loved ones over their own affairs, while others might want to enjoy their wealth fully in their lifetime.
To add to this, there may be some clients who could be vulnerable to regular financial obligations, where guaranteed income or annuities might be the most suitable solution, to other clients, conversely, who are wealthy enough to never need to draw meaningfully from their pots.
This diversity of outcomes makes a ‘one-size-fits-all’ solution entirely impractical. Finally, one challenge that’s less discussed in this equation is tax. The structure of how and where the accumulated assets reside – i.e. whether it’s pensions, ISAs, taxable accounts – can significantly impact the most efficient decumulation strategy.
It’s little wonder then that many advisers are now considering charging more for decumulation advice, as it can require a higher degree of technical expertise, particularly when managing withdrawals, sequencing, longevity, and tax optimisation.
The Changing Landscape
All eyes were on the recent budget, which saw pensions sit firmly in view. As things stand, any unspent pension wealth is sheltered from inheritance tax (IHT), resulting in many savers choosing to leave any surplus funds untouched and passed on to loved ones on death.
But from April 2027, pensions are set to be brought under IHT, lessening the attraction of passing these pots down generations. This change is already prompting advisers to explore alternative, tax-efficient solutions to mitigate potential IHT liabilities.
Crucially, these changes may also encourage retirees to spend more during their lifetime, rather than preserve their pensions solely for the benefit of passing on this wealth. For many, this is a significant behaviour change. One the adviser will play an important role in helping clients navigate.
As well, the FCA’s thematic review last year made it clear that firms need to distinguish between their Centralised Investment Proposition (CIP) and their Centralised Retirement Proposition (CRP). Carrying forward the same accumulation strategy into decumulation is simply no longer sufficient.
How Are Advisers Tackling Decumulation
Leaving annuities and vulnerable clients aside for a second, most advisers may adopt one or a combination of the following strategies:
- Natural Income – Relying on dividends and interest to provide an income stream without depleting capital.
- Smoothed or Guaranteed Funds – Reducing volatility and ensuring a level of stability in withdrawals.
- Bucketing Strategy – Dividing assets into different time-based segments to manage risk and return more effectively.
The natural income approach took a bit of a hit in 2020, and the reliability of this income has been called into question at times. Smoothed or guaranteed funds have begun to be used more widely, but most aren’t without their administrative challenges.
For many advisers, ‘Bucketing’ is viewed as the most straightforward, reliable and, crucially, allows them to tailor to their clients’ needs. Furthermore, most clients already understand assigning different pots of money for different goals.
For advice firms, the challenge of ‘Bucketing’ has been in two main areas – consistency of approach across advisers within the same business, and secondly, relying more on instinct than evidence when allocating across time horizons – something regulators are unlikely to accept without a well-documented, repeatable workflow.
Let’s not forget about the admin aspects as well – some platforms are still adjusting to the increased use of MPS, in which facilitating more than one investment strategy within the same tax wrapper or account, or enabling withdrawals to be taken in a flexible and controlled way, is not perfected yet.
The Future of Retirement Income Planning
While new investment solutions will undoubtedly continue to arise, many of the tools advisers need may already exist within existing CIPs. The difference lies in how those tools are structured, implemented, and aligned to individual client outcomes.
Planning-led technologies can help advisers model income, map risk to withdrawal strategies, optimise the blend of investments the client needs, to deliver more consistent and compliant retirement advice.
These tools can enable advisers to save time, as well as use to form part of the value of their ongoing advice process, which ultimately helps derisk the business while delivering consistent outcomes for end investors.
Here are three key considerations for firms looking to evolve their approach:
- Review your CIP/CRP toolkit
Identify whether you already have the right investment solutions or building blocks available, and whether they can be effectively combined to support a range of sustainable withdrawal rates across different time horizons. - Support advisers in structuring recommendations
Consider how advisers will determine the appropriate split between investment solutions within the portfolio. Is this process clearly defined and supported by guidance and/or tools? - Build a scalable, documented framework
Review and document a CRP process that can scale across your business – supporting compliance and enabling advisers to make consistent, repeatable investment choices that lead to better client outcomes whilst identifying and tracking vulnerabilities.
As William Sharpe, creator of the Capital Asset Pricing Model (CAPM), famously said,
“Decumulation is the nastiest, hardest problem in finance.”
To meet that challenge, advice firms should take a fresh look at how their centralised retirement proposition is constructed, and ask whether it is set up for success in today’s environment.
FT Adviser Article – 29 August 2025
