That rates will rise has been known for a while, he said, and if a client is coming up to retirement their portfolio should’ve already been heavily de-risked with a reduction in equity exposure.
“The key risk is that some of the asset classes that these investors would’ve been moving into anyway might be more susceptible to rate changes,” he said.
"But we are now getting to an interesting debate which is that after a long time of telling clients to avoid conventional government bonds as they are too vulnerable, rising rates are now prompting a bond sell-off.
“It’s all good and well saying I’m glad we didn’t hold them, but you need to start thinking at what point would you get back in," he said.
Martin Brown, managing partner at Continuum, said he was expecting a resurgence in the popularity of annuities as a result of the rate rise.
A client’s pension needs to last the rest of their retirement, he said, which could easily be more than 20 years away and include costs for the provision of care.
“One way to be certain of this is to arrange an annuity, buying a lifetime income from an insurance company.
“Index-linked annuities could prove to be a particularly popular recommendation as advisers look to offer their clients some protection against inflation which could be long-lasting.”
sally.hickey@ft.com
