John's blend
This scenario is for illustration purposes only.
For financial intermediary use only.
John's blend
This scenario is for illustration purposes only.
For financial intermediary use only.
- John, born in January 1959, is now retired. At age 65, John and his wife, Jean also 65, will not start to receive their State Pension of £23,005 pa until they turn 66.
- In the short term, to help cover expenditure, John’s prepared to sell down a general investment account portfolio (GIA) which makes use of his Capital Gains Tax (CGT) allowance of £3,000.
- They no longer have a mortgage and live a simple life in the midlands countryside, close to their married sons.
- John and Jean plan to spend a lot of their retirement time with their three grandchildren.
- John, born in January 1959, is now retired. At age 65, John and his wife, Jean also 65, will not start to receive their State Pension of £23,005 pa until they turn 66.
- In the short term, to help cover expenditure, John’s prepared to sell down a general investment account portfolio (GIA) which makes use of his Capital Gains Tax (CGT) allowance of £3,000.
- They no longer have a mortgage and live a simple life in the midlands countryside, close to their married sons.
- John and Jean plan to spend a lot of their retirement time with their three grandchildren.
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john'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.
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 £5,120 (approximately 6.74%) that is guaranteed for life. This enables the withdrawal rate on the remainder of the portfolio to be reduced to approximately 2.69% (equating to £8,180 income, inflation adjusted). This combined approach helps secure John's primary objective of £13,300 target annual income.
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
Lowering the portfolio withdrawal rate reduces the sequence risk within the remaining portfolio as a result of not having to generate as much income. More of the remaining portfolio could then continue to generate long-term growth, leading to higher portfolio values later in retirement as shown in the chart below.
For example, at age 87, when John has a 50% chance of still being alive, the new blended drawdown SIPP has a projected value of £282,988. This is £57,030 or approximately 25%, higher than the traditional SIPP portfolio projected value of £225,958. The blended drawdown solution has little impact on the probability of success of achieving the target outcome from the portfolio, in this instance moving from 99% to 98%.
The table and graph below show planning to 10% survival probability in isolation
key benefits of the new blended solution for John
The new blended portfolio solution could achieve a better outcome for John whilst continuing to be in line with his ‘balanced’ attitude to risk.
The guaranteed income producing asset is uncorrelated to other portfolio assets which helps to dampen portfolio volatility and improve the probability of successfully achieving John’s and Jean’s goals.
key benefits
of the new blended
solution for John
The new blended portfolio solution could achieve a better outcome for John whilst continuing to be in line with his ‘balanced’ attitude to risk.
The guaranteed income producing asset is uncorrelated to other portfolio assets which helps to dampen portfolio volatility and improve the probability of successfully achieving John’s and Jean’s goals.
Notes:
The guaranteed income producing asset is delivered through our 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 a 65 year old male, in good health, non-smoker, with a £380,000 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 £76,000 SLI purchase, this equates to a blended model of 50% Global equity / 30% 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 912 scenarios from 109 years of historic data. The £13,300 income has been modelled to keep pace with inflation.
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