Over the past few decades, the idea of retirement has changed dramatically. In the past, many people relied on Defined Benefit (DB) pensions, which guaranteed a set income for life. But today, most people have Defined Contribution (DC) pensions, where the amount you get in retirement depends on how much you’ve saved and how your investments perform.
Things changed even more in 2015, when the UK government introduced pension freedoms. These new rules gave people full access to their pension pots from age 55, along with a range of flexible options for how to take their money. While this gave retirees more control, it also introduced new challenges - like the risk of running out of money later in life.
To better understand the implications of these changes and how they can be addressed, Invesco teamed up with NMG Consulting to carry out a major study of the UK retirement income market. We spoke to retirees, financial advisers, and industry experts to get a full picture of what’s working - and what’s not.
One of the key takeaways from the study was the need to rethink the solutions for how we provide income in retirement, especially for people with DC pensions. Here are some highlights:
One option we believe could help is Invesco Bond Income Plus Limited Trust (BIPS), an actively managed fixed income investment trust. Its goal is simple: to obtain capital growth and income through quarterly dividends, to give retirees an income stream, whilst also aiming to grow the portfolio over the long term, which can be drawn down when you’re ready, unlike other solutions such as annuities.
The trust targets an annual income of 12.25 pence per share, which equates to approximately 7.2% per annum, please note this is not guaranteed.
BIPS invests in a diversified mix of high-yield bonds from different industries and regions. Instead of chasing short-term market moves, the team focuses on the fundamentals—looking closely at a company’s financial health, the sector it operates in, and the wider economic picture. This deep research helps them choose bonds with strong long-term potential. At every step, they also work to manage risk carefully.
A significant advice gap exists among a large portion of people in, or approaching, retirement who lack the support they need to make informed decisions about how to invest and draw down their retirement savings.
The 4-Life framework helps put in place a robust retirement plan that explicitly addresses the risks people are increasingly facing as they seek to take control of their retirement path. Find out more.
Explore Graham Hook's insights on the critical economic shifts and fiscal strategies outlined in the latest UK Spring Statement, highlighting key policy changes and their potential impacts.
