The UK’s retirement market stands once again at the brink of profound change. The FCA’s December 2024 consultation paper – creatively titled CP24/27: Advice Guidance Boundary Review: Proposed Targeted Support Reforms for Pensions – paired with the upcoming Pensions Schemes Bill 2025, represents a regulatory double act poised to transform how retirement income solutions are delivered.

This approach represents a critical evolution beyond existing Pension Freedoms (2015) legislation, where retirees frequently struggled with overwhelming choice, leading to premature withdrawals or complete indecision.

Guided retirement: Addressing the advice gap

The Pension Schemes Bill 2025 introduces a statutory “Guided Retirement” duty by 2027-28, effectively creating default retirement income ‘pathways’. Imagine an ‘auto-enrolment’ style approach, but for the critical stage of turning accumulated pensions into sustainable income.

Targeted support: Bridging the gap

In tandem, the FCA’s CP24/27 introduces “targeted support” – a new regulatory concept offering tailored suggestions without crossing into regulated advice territory. Initially focused on pensions due to the significant risks involved in retirement decisions, the targeted support regime will eventually expand to other investment areas. For advisers, this means the ability to offer meaningful, tailored insights without crossing regulatory thresholds.

Monthly Income Fund: A natural fit

Baillie Gifford’s Monthly Income Fund aligns perfectly with these regulatory changes. Designed with simplicity, liquidity, and transparency in mind, it aims to provide stable, inflation-linked monthly income – a key requirement in this evolving regulatory landscape.

Utilising our global investment outlook and flexible tactical asset allocation, the Fund seeks sustainable, long-term income growth rather than short-term yield chasing. This disciplined approach explicitly addresses regulatory concerns by focusing on reducing income volatility and delivering steady monthly payouts.

The advantage of ‘natural income’

Our ‘Natural Income’ strategy offers an intuitive solution:

• Stable income: The fund’s natural income stream aims to serve as a safe withdrawal guide, eliminating guesswork.
• Predictability: Avoids reliance on volatile market performance or forced asset sales.
• Competitive edge: Offers superior predictability and simplicity compared to segmented pots, capital withdrawals, or cash buffer strategies, without the rigidity associated with annuities.

Every retiree has unique goals, but for those prioritising stability, transparency, and simplicity, the Monthly Income Fund is designed as a one-stop solution. Already adopted by prominent platforms for their decumulation pathways, it’s specifically built to help retirees manage their financial future confidently.

Ready for tomorrow

Will these regulatory initiatives fundamentally reshape retirement income markets? Undoubtedly. Will they create initial complexity? Probably. But amid these challenges, trustees and advisers can find clarity, confidence, and resilience through the Baillie Gifford Monthly Income Fund.

Annual past performance to 30 June each year (net %)

Source: FE, Revolution. Net of fees, total return in sterling. *Investment Association Mixed Investment 40-85% Shares Sector

Past performance is not a guide to future returns.

The Fund has no target. However you may wish to assess the performance of both income and capital against inflation (UK CPI) over a five-year period. In addition, the manager believes an appropriate performance comparison for this Fund is the Investment Association Mixed Investment 40-85% Shares Sector.

Source: portfolio adviser