Advisers can determine income based on current and future levels of withdrawals being taken within approved limits and compare this against an inflation-linked income target.
The model uses the client’s age, gender and current size of the pension fund. Factors such as tax-free cash withdrawal and early death scenarios can also be applied. It assumes an annuity decision will be made at age 75 but advisers can specify their own assumptions for gilt yields, inflation rates and net fund growth rates. Both single and joint life scenarios can be illustrated.
Life Trust says advisers can also weigh up the client’s current income drawdown strategy against alternative investment plans.
Chief executive Andy Briscoe says: “Drawdown has grown in popularity over recent years but there hasn’t been a simple way for advisers to project their clients’ income streams over the longer term. While drawdown arrangements offer clients more flexibility and liquidity than annuities, they are more exposed to both withdrawal risk and timing risk, particularly when markets are volatile.
“A broad range of options need to be considered in the advice advisers are giving to their clients about how best to fund their retirement years. This new modelling tool not only allows advisers to show clients whether they are likely to face future cash flow issues but also how additional investments, such as the Life Trust LIP, will fit into their retirement planning.”