The debate here is about whether to use passive, index tracker funds with lower charges v or proactive, actively managed funds when your pension is in flexible drawdown.
Low charges, simply track whatever index or fund sector you choose e.g. FTSE 100 Index Tracker or Pharmaceutical Sector Exchange Traded Fund (ETF) but the disadvantages being there are no dividends and there is no proactive changes if markets, sectors or the economy make it likely for the fund to fall.
Are managed by a fund manager with decisions made on how the fund is weighted based upon the fund managers views on markets e.g.de-risking if markets look like they are going to fall plus dividends received on shares held within the funds being reinvested to boost returns. The downside here is higher charges.
We believe that when you are in flexible drawdown you cannot afford for your pension funds to be invested in passive funds (unless you are actively managing the tracker funds yourself) as no action will be taken if there is likely to be a correction or market crash in the area you are invested in whereas an active money manager may at least be taking some action to cushion the risk of losses. When you are using drawdown you simply cannot afford to loses huge portions of your wealth as you have little time to recover the losses or indeed you do not want to spend capital and deplete funds. We also suggest, anyone in flexible drawdown should have a cash fund that they use to drawdown income when needed and thus not spend any market invested funds if they have fallen in value.
We are also firm believers in consistency. We look for active fund managers and their funds where consistent above average performance over not just 1 year but over every year (and different periods) over the last 5 years as well as overall 3 and 5 year periods.