In Part III of this series we discuss Centralised Retirement Propositions (CRPs). We have seen a number of financial planners post-pension freedom rebadge their existing Centralised Investment Propositions (CIPs), which have been designed for accumulation, into CRPs. As volatility increases, concerns are growing that sequencing risk (sometimes called “pound-cost ravaging”) could have a devastating impact on their client’s investments. But what can advisers do to help mitigate this and design more decumulation-focused portfolios?
The return investors expect for accepting credit risk is often thought of as the credit spread, minus the cost of downgrades and defaults. But that neglects the significant benefits that can come from credit spreads tightening as bonds get closer to maturity, also called credit rolldown.