Geoff's blend
This scenario is for illustration purposes only.
For financial intermediary use only.
Geoff's blend
This scenario is for illustration purposes only.
For financial intermediary use only.
- Geoff has just turned 70 and had his annual review with his adviser last week, having been in flexi-access drawdown since he retired five years ago.
- He enjoys a modest Defined Benefit (DB) pension of £4,000 pa earned during a successful decade teaching and then went on to build up a SIPP portfolio from running his own training consultancy.
- Attracted by the benefits of flexibility and choice introduced just before he retired, Geoff moved £400,000 into a drawdown portfolio.
- Geoff has just turned 70 and had his annual review with his adviser last week, having been in flexi-access drawdown since he retired five years ago.
- He enjoys a modest Defined Benefit (DB) pension of £4,000 pa earned during a successful decade teaching and then went on to build up a SIPP portfolio from running his own training consultancy.
- Attracted by the benefits of flexibility and choice introduced just before he retired, Geoff moved £400,000 into a drawdown portfolio.
- Due to a period of strong equity performance following his retirement, Geoff was able to withdraw the income he needed to fund his travel and other needs, whilst maintaining his portfolio value.
Due to a period of strong equity performance following his retirement, Geoff was able to withdraw the income he needed to fund his travel and other needs, whilst maintaining his portfolio value.
To maintain the sort of lifestyle he wants to lead, Geoff feels he needs £30,000 pa. So, in addition to his State Pension and the teachers’ pension, he now needs his £400,000 SIPP portfolio to sustain an income of £16,000 pa, while leaving some for his children.
Geoff’s adviser has suggested a new retirement income proposition that could help him achieve a better portfolio outcome.
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outcomes for your clients?
Geoff's options
Below is an illustration comparing a traditional drawdown SIPP portfolio and a new blended drawdown SIPP portfolio. It shows how long-term portfolio performance can be improved by integrating a guaranteed income producing asset (GIPA) alongside equity and bond assets to achieve a better client outcome.
Traditional drawdown
Sipp portfolio
new blended drawdown
sipp portfolio
Traditional drawdown
Sipp portfolio
new blended drawdown
sipp portfolio
Does your client have different needs?
Click on an image to find out how a guaranteed income producing
asset could improve the outcomes for each scenario.
Does your
client have
different needs?
Click on an image to find out how a guaranteed income producing asset could improve the outcomes for each scenario.
PORTFOLIO Value
In the blended drawdown solution, 20% of the traditional SIPP portfolio is used to purchase a guaranteed income producing asset which generates an annual income of £5,936 (approximately 7.42%).
The guaranteed income producing asset has reduced the withdrawal rate on the rest of the portfolio to approximately 3.14%. This is below the 4.00% withdrawal rate that Geoff started with without having to reduce his primary objective of generating £16,000 annual income.
The blended drawdown solutions fulfils Geoff’s secondary objective, to maximise legacy. For example, at age 87, when Geoff has a 50% chance of still being alive, the new blended drawdown SIPP has a projected value of £308,436. This is £44,457 or around 17%, higher than the traditional SIPP portfolio projected value of £263,979.
The table and graph below show planning to 10% survival probability in isolation.
As shown in the chart below, should Geoff live a longer than average life, the greater the legacy improvements are by using this blended drawdown approach.
As shown in the chart below, should Geoff live a longer than average life, the greater the legacy improvements are by using this blended drawdown approach.
key benefits of the new blended solution for Geoff
His success rates have improved, making him feel more confident that his plan can weather future market volatility.
The income producing potential of the portfolio has improved. This is due to a guaranteed income producing asset being able to produce almost 37% of the income Geoff needs from 20% of the portfolio.
The portfolio withdrawal rate has been reduced and with equity allocations maintained, his legacy objective can still be achieved.
key benefits of
the new blended
solution for Geoff
His success rates have improved, making him feel more confident that his plan can weather future market volatility.
The income producing potential of the portfolio has improved. This is due to a guaranteed income producing asset being able to produce almost 37% of the income Geoff needs from 20% of the portfolio.
The portfolio withdrawal rate has been reduced and with equity allocations maintained, his legacy objective can still be achieved.
Notes:
The guaranteed income producing asset is provided by Secure Lifetime Income (SLI).
Scenario numbers are illustrative only, and correct as at 11 March 2024 to show how a guaranteed income producing asset can be included alongside equities and bond assets in a drawdown SIPP portfolio.
Projections shown are hypothetical and are based on assumptions, not indicative of future performance and should not be the sole basis for investment decisions. Investment returns can fluctuate.
Example based on 70 year old, male, in good health, non-smoker, with a £400,000 total portfolio value. Traditional drawdown SIPP portfolio scenario is based on 50% Global equity / 50% UK Aggregate bonds asset allocation. New blended drawdown SIPP portfolio scenario is based on £80,000 SLI purchase, this equates to a blended model of 55% Global equity / 25% UK Aggregate bonds / 20% SLI asset allocation, total fees of 1.75%.
Figures are generated via Timeline with rates supplied by Just using median return from 972 scenarios from 109 years of historic data. The £16,000 income has been modelled to keep pace with inflation.
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