Over half of income drawdown customers withdrawing too much to last their lifetime

Over half (53 per cent) of income drawdown customers are withdrawing an income that is not sustainable for the rest of their life, according to analysis by Royal London.

Royal London, however, noted that some members may have chosen to withdraw their pension “aggressively”. For instance, a 60-year-old may choose to draw down one pot to give them income before others become available at age 65.

On the flipside, 47 per cent are withdrawing an income that has an 85 per cent chance of lasting the duration of their lifetime. Royal London has developed a heat map to assess the sustainability of different withdrawal rates over different terms. The figures show that over a 15-year term a 6 per cent withdrawal rate is highly sustainable. However, as the term increases, this become unsustainable.

Royal London’s customers are invested in a variety of different strategies with 30 per cent of those with a high level of income sustainability being invested in Royal London’s Governed Retirement Income Portfolios (GRIPs).The GRIPs are a suite of five portfolios designed specifically for clients in income drawdown.

Royal London Intermediary Pensions head of investment solutions, Lorna Blyth, said: “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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