Retirement Income – why clients need a better solution

In a recent survey, of 300 advisers, 7IM found that almost 79% (or 4 in 5) now either had solutions for clients post retirement, or thought that implementing one was needed.

Clearly then advisers are increasingly aware of the growing need to address their client’s retirement plans. Just over 58% told us that, much in the same way as the vast majority use centralised investment propositions when clients are in the accumulation phase, they would like to use a Centralised Retirement Proposition (CRP) to help clients in retirement.

However, that responsibility to clients in retirement is not made any easier by a dearth of suitable products. The recent FCA’s Retirement Outcome Review has highlighted the lack of innovation in this area.

7IM believes it has a solution that can help advisers with their clients in retirement, who are looking to decumulate their capital across tax wrappers in the most tax efficient manner, whilst crucially keeping the flexibility to adapt to ever changing client circumstances.

The 7IM Retirement Income Service

After extensive research into the retirement market over the last few years, 7IM has recently developed its own proposition, called the 7IM Retirement Income Service (RIS) which incorporates investment science, investor behaviour and the requirements of the regulatory environment to ensure a consistent, robust approach to managing income for clients in retirement.

Instead of thinking simply in terms of managing portfolios within the various available wrappers, 7IM splits the overall pot of money into four different time horizons (cash, low risk, medium risk and high risk) and creates a pot for each of these across the different tax wrappers depending on which are being depleted first. 

Importantly the cash and low risk element not only ensures that the client has ready income, but also a cash buffer to cover and mitigate sequence risk which we can be highly damaging to clients in retirement.

The split of the assets between the pots is determined by the initial work that 7IM does with the adviser and their client – drawing on the adviser’s expertise in goal-setting and cash flow planning. This will also determine how much money goes into the near-term 'cash pots' to meet the client’s immediate income requirements and provide a cash buffer, and how much is targeted towards the longer term, whilst most crucially also keeping the client in the agreed risk mandate on an ongoing basis.

How is 7IM’s Retirement Income Service different?

While advisers may be used to rebalancing to a target asset allocation within a particular tax wrapper, the 7IM RIS does this work for them. Ensuring that the client’s specific goals are met (no matter their circumstances) while and rebalancing across multiple sub-portfolios and tax wrappers. This is simply something that no one else offers and is an in-built advantage of the 7IM Platform where advisers can hold multiple sub-portfolios across tax wrappers and report on them all at once.

In addition, the multiple portfolios used in the tax wrappers can be endlessly customised, allowing for a truly personalised service that meets the client’s needs.

The key is the data and analysis behind the service, which allows advisers to 'plug & play' and via the 7IM retirement matrix that takes into account over 50,000 assumptions covering everything from longevity to desired withdrawal rate to cost and inflation.

Importantly, all of this is based on a model and service which has already proven useful to 7IM and its own clients. The RIS is easy to administer, cost effective, meets the highest regulatory standards. It has been designed to truly reflect the real circumstances people may find themselves in after retirement.