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Retirement

Baby boomers must ‘take more risk’ to up retirement income

Nicola Brittain
Written By:
Nicola Brittain
Posted:
Updated:
18/06/2013

The baby boomer generation must take more investment risk if it is to generate enough income in retirement, according to one investment management chief.

Principal Global Investors chief executive Nick Lyster said with the baby boomer generation moving into retirement, there will be 15 years when “literally trillions of dollars pour into the investment market”.

He said this would likely could come from defined contribution (DC) plans.

The payout on products will therefore be kept low by higher demand, he said. 

As a result these pensioners will need to take more risk leading up to or during their retirement to receive a satisfactory level of income. 

Lyster explained that retirees should therefore be looking at diversified income funds including income funds, equities, bonds, infrastructure, real assets and property to provide a steady and in some cases inflation proofed income stream.

These baby boomers would likely balance this risk by putting some of their assets into a guaranteed fund to deliver a certain level of income, he added.

Lyster explained: “The challenge for the investment management industry is to create products that work and deliver some income stream – but the fees chargeable will be lower, because the returns will be lower.” 

He added that those will a small pot – of £100,000 or less – would probably need to go down a guaranteed, not an investment management route.

 


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