Withdrawal minimisation strategy Is designed to ensure that the client preserves the value of their pension for an aim unrelated to provision of an income. For example, some clients’ objective is to pass on the maximum possible inheritance. In such circumstances, the client’s assets are likely to be invested in a way that maximises growth over the long term. Fixed term annuity strategy This relies on drawdown products that pay a fixed level of income for a fixed period of time. It should be noted that technically this is a drawdown arrangement and not an annuity product. There are many different products available in this space which may return some or all of the capital at the end of the term, provide guarantees and provide death benefits. Once the fixed term annuity has ended, the client has the option to purchase another fixed term annuity, purchase a pension annuity or withdraw assets via drawdown. Ad hoc withdrawals only strategy This is designed for clients who wish to access their retirement savings on an ad hoc basis. In this case, the pension scheme will typically not be needed for income. Investment strategies may vary. Some investment may be in assets for long term growth. Cash or cash like assets may also be held for short term, ad hoc withdrawals. Applying the type and strategy to your process The reason I have included this detail from the RIAAT tool is that the whole theme from the Thematic Review is ensuring all risks relevant to any particular type or strategy are considered, explained and where appropriate, managed. So you may wish to consider your process and the due diligence that supports this as an Evidence Based Income Strategy. You can review the tool for the Regulator’s view of the detailed steps you should take, but as a flavour here’s their view on the key points to identify and consider for a sustainable withdrawal rate strategy (each strategy has its own set of further steps to identify and consider): • the recommended withdrawal rate • the allocation of recommended investments • how long the client requires their retirement savings to last • the client’s attitude to risk • the client’s knowledge and experience in relation to this type of investment and the impact it will have • how the firm has mitigated the risks associated with this strategy, including sequencing risk, inflation risk, and longevity risk • the impact of costs and charges • the client’s willingness and ability to change the level of their withdrawals depending on the performance of their investments. 7 Income Drawdown
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