Only half of drawdown clients have income likely to last for life

By Justin Cash

Nov 23, 2018
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Only half of drawdown customers are taking an income level that is likely to last them their lifetime, Royal London estimates.

Figures from the firm’s drawdown governance service show that 53 per cent of customers have a less than 85 per cent chance their income will provide for them for life.

However, Royal London notes than can be compelling reasons for clients to draw an apparently unsustainable level of income, for example a retiree drawing down more from age 60 before state pension or other benefits kick in at 65.

Royal London has calculated an income sustainability score for clients, showing that while a 6 per cent withdrawal rate may be sustainable over a 15 year horizon, this can soon run the risk of the pot depleting.

Royal London head of investment solutions Lorna Blyth says:“For some income drawdown customers income sustainability is not so important as they have high capacity for loss. For others it is extremely important that they understand the risk around potentially running out of money.”

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