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Defaqto to launch retirement income tool

Defaqto to launch retirement income tool

Defaqto has revealed it will launch a retirement income tool helping advisers compare and select appropriate income funds based on their clients' specific needs.

Due to be launched in the first quarter of 2017, the "Income Profiler" will be available to  advisers using Defaqto's Engage platform.

The tool assesses the client's income and capital growth needs, and places them in one of four "quadrants" based on their tolerance to income volatility.

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Those quadrants are: low income volatility; medium income volatility; high income volatility; and capital preservation.

The income volatility metric will measure the consistency of the fund in question's income distribution versus the overall capital preservation.

That would mean a client who needed to draw down a very regular income might fall into the "low income volatility" quadrant, while a client prioritising capital preservation over income might fall into the "capital preservation" quadrant.

Frank Potaczek, senior vice president of funds & DFM at Defaqto, said the tool was specifically designed to meet the income needs of clients post pension freedoms.

He said the tool was for people who want an annuity-like income, but want to pass their capital on to their children.

"That's not to say that annuities are not useful in the financial planning stage," he said. "It may well be that advisers ... will advise you to by an annuity to make sure that, come hell or high water, your living expenses are taken care off."

This, he said, might take the form of a deferred annuity.

"But the rest of the capital you can invest, and that can be your discretionary spend."

He said the Income Profiler would get advisers to the point where they had a range of appropriate income funds to choose from. After that it would be up to the adviser.

Defaqto said it had not yet decided whether or not use of the Income Profiler would attract an additional charge to the approximately 6,000 advisers already using the Engage platform.

james.fernyhough@ft.com