Getting old is part of the life cycle. With more people expected to live longer, a secure income in retirement is needed. The Office of National Statistics (ONS) predicts that by 2035, there will be around 58,000 people living in the UK over the age of 100 – a quadrupling from today’s figure.

By 2030, the number of people in the world aged 60 years or over is projected to grow by 56% to 1.4 billion, rising further to over 2 billion by 2050.

The number of people aged 80 or over will also grow, reaching 434 million by 2050, in contrast to approximately 125 million today.

In an attempt to tackle this issue, SWIP have launched four Retirement Portfolio funds which are designed to reduce the risk of capital losses for drawdown customers during volatile markets by using a ‘dynamic volatility management’ (DVM) process that maintains exposure to equity growth opportunities unless volatility becomes significant – at which point exposure is reduced temporarily.

Other factors retirees fail to take into consideration when planning their retirement income are: healthcare costs (not covered by medical insurance), long-term care costs (live-in care or residential care home, or some sort of assisted living), ongoing debt repayments, support for children and/or grandchildren.

Scottish Widows head of fund proposition Iain McGowan says: “Since the introduction of pension freedom, an increasing number of customers stay invested during retirement and withdraw money using income drawdown. They need an appropriate investment strategy that balances the potential for investment growth with the desire to mitigate significant losses.

“The Retirement Portfolio funds recognise customers’ need for real growth to help protect their income and lifestyle from inflation, while balancing that exposure with an appropriate level of investment risk. The funds are designed to address both of these requirements – without the need for expensive guarantees or complicated hybrid design.”

The funds invest in UK and global fixed-interest and equities and use index-tracking investments with the aim of keeping costs down.

Sabuhi Gard is an investment writer for Incisive Works.

Further reading on this topic:

Planning retirement in five steps