Tower Bridge

Is your Centralised Retirement Proposition (CRP) missing a critical element?

17 Apr 2019

In the world of financial advice, there’s much love in the air for Centralised Retirement Propositions, or CRPs.

That’s because, in the shifting landscape of pension freedoms, they take the Centralised Investment Propositions (CIPs) that have been so effective for accumulation, and adapt them for decumulation too. That’s maybe why in our recent survey of 300 advisers, almost 6 out of 10 said they wanted a CRP in the same way that they have a CIP.

But initial attraction isn’t turning into a full blown romance. This is because many are incomplete, lacking a robust drawdown solution.

Will the money last?

When managing people’s retirement pots, one issue is always centre-stage: how to make that pot last for a lifetime, when we don’t even know how long that lifetime will be.

But the design and inflexibility of many CRPs without an income drawdown solution make it harder to manage the numbers to meet the goals of clients who need that solution. Without a proper income drawdown solution many CRPs lack back-testing during all market cycles, which may leave clients vulnerable to sequence risk and risk of ruin.

Costs have to be fair

Next, there’s the issue of costs.

CRPs have clear benefits for advisers – for example, they help you meet your MiFID II and PROD responsibilities around disclosure and client suitability, without requiring you to commit huge resources. The overall cost including investment management, service charge and adviser charge needs to be reflective and fair for the service provided.

Income drawdown solutions as part of a CRP don’t have to be cheaper than other routes, but they do have to be demonstrably fair.

Admin needs to be easy

There’s a similar story with administration. Responsiveness, flexibility and client experience are crucial, and advisers need a CRP that works at scale for every client. 

How to do better

We’ve built our income drawdown solution, called the 7IM Retirement Income Service, to reflect real life – where circumstances change and flexibility is crucial – but without adding complexity or cost. It’s scalable and easy to use, yet immensely sophisticated behind the scenes. And it’s based on comprehensive modelling and research.

Here’s just one example of that. To meet clients’ needs for income requires a continual rebalancing to a target asset allocation in a portfolio. The norm for income drawdown is to do this within a specific tax wrapper (i.e., their SIPP or ISA).

But our RIS is smarter than that. It rebalances across the overall portfolio and multiple tax wrappers, so your clients are in the right place, at the right time, across all their holdings. You won’t find this anywhere else.

We’d love to tell you more about this and other aspects of our Retirement Income Service and answer your questions. Call us on 020 7760 8829 for more information.

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The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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