Two people can retire on the same day, with the same money and similar retirement objectives, yet experience very different retirement outcomes because of how their portfolio responds during a market shock.

Are we measuring the right things?

Retirement planning is often assessed in terms of longterm returns, withdrawal rates and asset allocation. While these remain important considerations, they don’ t always reflect how clients actually experience retirement.

For clients drawing an income, success is rarely defined by a performance table. It is reflected in whether retirement plans remain on track, whether confidence can be maintained during periods of uncertainty and whether savings continue to support the lifestyle the client originally intended.

A major market shock can test all three.

The same retirement. The same market crash

Consider two retirees, Sam and Chris, who both retire at age 65 with pension pots worth £ 500,000. They each plan to withdraw £ 25,000 a year to support their retirement lifestyle. They have similar objectives, similar attitudes to investment risk and carefully constructed retirement plans. However, their advisers have adopted different approaches to managing downside risk within their respective Centralised Retirement Propositions.

A major market shock then occurs, comparable to the Global Financial Crisis of 2008 – 09, when markets fell sharply and investor confidence came under considerable pressure. Although both retirees begin their journey from the same starting point, as markets fall their experiences begin to diverge.

When confidence starts to disappear

Chris experiences a significant reduction in the value of his retirement portfolio. Questions that may have seemed theoretical only a few months earlier suddenly become much more immediate. Is his withdrawal strategy still sustainable? Should he continue taking the same level of income? Will his retirement savings support the lifestyle he originally envisaged?

As markets continue to fall, those concerns become increasingly difficult to ignore. Like many investors

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