Maximising the Benefits and Minimising the Risk of Drawdown

1. Maximising the Benefits and Minimising the Risk of Drawdown

2. Retirement income planning in 2015 A NEW ERA Tax Free Cash 3 Key Choices Retirees Additional cash needs? Sustainable Income Needs: Personal MIR Accelerated Income needs?

3. Learning Outcomes • Describe the purpose of Drawdown reviews, HMRC and FCA requirements • Calculate relevant and personalised critical yields • Evaluate when conversion to an annuity might be considered • Understand what an appropriate process for Drawdown reviews might look like

4. Handset Question 1 What does your Drawdown Review process currently look like for clients under 75? Annual review by post, email or telephone. Three yearly review by post, email or telephone. Annual review face to face. Three yearly review face to face.

5. Adviser The purpose of Drawdown Reviews Retirees • HMRC Requirement • GAD Review to ensure fund doesn’t deplete too quickly • Ongoing review post 2015?

6. FCA Rules for Drawdown Reviews Outcomes = personal recommendations Regulatory updates 55 and 67 COBS 9.3.3

7. Best Practice for Drawdown Reviews – COBS 9.3.3 “When a firm is making a personal recommendation to a retail client about income withdrawals or purchase of short-term annuities, it should consider all the relevant circumstances including: the client's investment objectives, need for tax-free cash and state of health; (2) current and future income requirements, existing pension assets and the relative importance of the plan, given the client's financial circumstances; (3) the client's attitude to risk, ensuring that any discrepancy is clearly explained between his attitude to an income withdrawal or purchase of a short-term annuity and other investments. COBS 9.3.3

8. An appropriate process – meeting the needs of COBS 9.3.3 Frequent reviews Charge an explicit facilitated fee Conduct full fact find Check Drawdown ATR Relevant Critical Yields Change in circumstances State of health – self and dependants Capacity for loss Make recommendation Issue relevant annuity quotes Discuss options with client

9. Is anything missing from your Drawdown Review Process? “A process which doesn’t include both health questions and the practical use of the answers to those questions is likely to result in more clients remaining in drawdown, possibly to their detriment”

10. Outcomes of the typical Drawdown Review Are sufficient reviews being undertaken and is health being considered?

11. What are the outcomes of the typical Drawdown review? Two key questions Based on the requirements of COBS 9.3.3. is anything missing from your Drawdown review process?

12. Capped Drawdown Review: Outcomes • Leave everything untouched • Stay in drawdown with adjusted income levels • Move whole fund to annuity/enhanced/impaired annuity • Move part of fund to annuity/enhanced/impaired annuity • Move to Flexible Drawdown

13. Outcomes of the typical Drawdown Review Enhanced annuity rate? Income requirements Critical Yield Assess risk profile Construct investment portfolio

14. Three Steps to a Personalised Critical Yield Underwrite Personal Critical Yield Income Shape

15. Impact on Critical Yield calculation Personalised Critical Yield Step 3 Income 12.67% Step 2 Shape 6.45% Step 1 Underwrite 7.14% Quoted CY from Capped DD quotation 6.51% 10.00% 15.00% 5.00% 0.00% Source: Avelo Exchange & Just Retirement Limited 16.04.14. Based on an individual aged 65, with a £100k fund, monthly in arrears, no escalation, no value protection, 50% spouses pension, 5 year guarantee period, based on RH2 7RT  postcode. An annual management charge of 2% has been assumed when calculating critical yields.

16. Handset Question 2 Would you like a copy of the Critical Yield Calculator? Yes No

17. When might a conversion to annuity be considered? Health ATR changed Gtd income now important LTC Concerns re performance required Legislation, GAD, etc Death of spouse Now fully retired Assets depleted Mortality drag

18. Is phased conversion to annuity something to be considered? Drawdown becomes progressively less suitable as we age; Additional asset growth required to counteract the drag effect against increasing age Annual mortality subsidy based on age of buying annuity

19. Exit strategies are important because of mortality drag When should annuitisation start? Financial sense of annuitising increases Additional asset growth required to counteract the drag effect against increasing age Annual mortality subsidy based on age of buying annuity

20. Conclusions Talk to us! Better Client Outcome Support Ask the right Questions adviser A useful Benchmark Regulatory Risk Annuities: Still relevant and valuable How to Reduce

21. Handset Question 3 Following this presentation, to what extent will you now consider changes to your review process? May consider making significant changes. May consider a few changes. Am unlikely to make any changes.

22. Thank You

23. Learning Outcomes • Describe the purpose of Drawdown reviews, HMRC and FCA requirements • Calculate relevant and personalised critical yields • Evaluate when conversion to an annuity might be considered • Understand what an appropriate process for Drawdown reviews might look like

24. Important Information It is our intention that the information contained within this presentation is accurate. We have taken all reasonable steps to ensure that it is up-to-date and where relevant, reflects the current views of our experts. However, we do not accept any liability for errors or omissions in the information supplied and if you require clarification on anything, our recommendation is that you contact us at the address below for verification, or call 0845 302 2287. Our registered address: Just Retirement LimitedVale House, Roebuck Close, Bancroft Road, Reigate, Surrey RH2 7RU. Regulatory information: Just Retirement Limited (Registered in England Number 05017193). Registered Office: Vale House, Roebuck Close, Bancroft Road, Reigate Surrey, RH2 7RU. Just Retirement Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.