“As interest rates rise from zero or thereabouts, then there is only one way bonds can go, and that’s down” – Adam Walkom, IFA Magazine
PWP managing partner, Adam Walkom, was quoted in IFA Magazine this week, in an article entitled ‘Do we need to rethink the risk around asset classes & the ‘lifestyling’ in pensions? verdict from IFAs after a turbulent two weeks’.
Adam Walkom, Co-founder at London-based Permanent Wealth Partners: “To say the writing has been on the wall for lifestyling is the understatement of the century. Good riddance to this ridiculous strategy, but as ever, of course, it’s the unsuspecting investors who pay the price. Pension companies are sleepwalking into another PPI-style nightmare with the insistence to push unsuspecting investors into Lifestyle or Target Date funds. As interest rates rise from zero or thereabouts, then there is only one way bonds can go, and that’s down. Lifestyle strategies automatically, without the client’s consent remember, move portfolios into “safe” assets such as bonds and cash. In many cases these will make up nearly 70% of the investor’s portfolio. Yet this investment strategy will be almost guaranteed to lose money as interest rates rise, let alone nowhere near keep up with inflation. Despite this, pension companies continue to push investors into these funds as their default option. The UK Government-backed NEST pension scheme, which now has £21.9billion of investor assets from 10.4 million investors, even admits that over 90% of people never change from the default fund they are invested in. That’s 10.4 million people – just from one pension company – who have a very real chance that their pension will not keep up with the cost of living. If an IFA was to make a change to a client’s portfolio without their consent, he would be hung out to dry by the regulator. Why isn’t the same happening for pension companies?”