The thought of getting access to your retirement cash and deferring the purchase of an income for life with an annuity is welcoming for many. Those who are fully invested in shares are hit by a second blow. They are having to sell shares when their values are low so they can move to safer investments. So, good fund performance is vital. Mr Brady says the majority of his clients have invested in cash and zero-dividend preference shares for the next few years to get both a return on their funds and protection from stock market ups and downs.
Zeros are a type of share that has a predetermined redemption date and price.
There is no income paid by these shares, only growth. The widespread use of with-profits as a drawdown investment is also causing concern. Many advisers say this is an extremely high-risk strategy. Clients wholly invested in with-profits have seen bonuses drop dramatically. Therefore, either the amount of income they take or the overall value of the fund will have to fall.