Scottish Life launches multi-asset drawdown portfolio range
Governed retirement income portfolios developed for those people who don’t want to buy an annuity.
Advisers will have five new drawdown portfolios to recommend to clients approaching retirement after Scottish Life unveiled its new governed retirement income portfolios.
Planned for 29th August, the five Grips, which are diversified multi-asset portfolios, will allow advisers to help people make the most of their income in retirement through a drawdown arrangement.
Aimed at individuals aged 55 and over, the Grips have been developed for those people who don’t want to buy an annuity at retirement but who want a defined level of income, without having to choose their investments themselves.
The portfolios will help to provide the right risk-return balance for retirees, depending on their expectations and the level of risk they can afford to take, giving an expected level of income each year through drawdown until they choose to buy an annuity, while remaining invested.
Part of the reason for this development is the continued disenchantment with the government actuary’s department rates caused by low interest rates and a higher inflationary environment causing downward pressure on gilts. This has made buying an annuity at retirement less attractive.
However, Lorna Blyth, investment marketing manager at Scottish Life, said the biggest factor behind the launch is the rapidly changing demographic landscape.
She pointed to figures from the department of work and pensions that showed 811,000 people will turn 65 this year, compared with 540,000 in 2000. With the increasing life spans and pressure on pension schemes, it is becoming more important for advisers to help their clients plan for a longer retirement.
This means not only helping to provide a defined yearly income through drawdown, but also to maintaining the pension in an acceptable investment portfolio, giving the retiree more control over how their money is put to work for them.
In addition, the Grips range - which was road-tested with a panel of network IFAs and nationals in January this year - will come with a planning tool for advisers to use with their clients, to help gauge the individual’s attitudes to risk, affordability, expectations in retirement and desired returns.
The five portfolios - Grip 1, 2, 3, 4, and 5 - will invest in a mix of equities, corporate bonds, index-linked gilts, high yield bonds and property, and each portfolio will be monitored to ensure appropriate levels of asset allocation.
For example, for those at the lowest risk end of the scale, Grip 1, the portfolio will have just 10 per cent in equities, but 65.5 per cent in 10-year index-linked bonds and 12 .5 per cent in corporate bonds.
For those clients who can afford to take greater risk, and whose attitude to risk fits the profiling tool, Grip 5 will have a 53.5 per cent weighting towards equities, and nothing in 10-year index-linked bonds.