Managing the balance between flexibility and security Gavin Casey Distribution Director Aegon Retirement Roadshow 1.Consider the options facing clients at retirement Annuity Drawdown Take the cash 2.Analyse the risks inherent in these options 3.The rise of the hybrid solution Learning Objectives Retirement Roadshow Small Pots Will take the money and Run Ultra- wealthy Tax and legacy planning Retirement planners Decisions to make Three Client Groups Retirement Roadshow Income Security Access Flexibility Digital Legacy Client Requirements Retirement Roadshow Real Assets Transition to retirement WHEN? Cash Lock-in Lifestyle Annuity Secure Drawdown Drawdown Cash Options Retirement Roadshow Certainty of income For life Deferral bonus Access Death benefit Additional cost Restricted fund choice Flexible Accommodates CIP Real asset growth Buy annuity later Death benefit Market risk Sequence of returns Outliving investment Certainty of lump sum Spend how you like No investment constraints Tax Outliving investment Certainty of income For life No investment Risk Irreversible? Later life health issues Inflation erosion Early death ADVICE RISK Annuity Secure Drawdown Drawdown Cash Options Retirement Roadshow Withdrawal Rate Change in circumstance Longevity Challenges Retirement Roadshow (Standard returns, 30 year term) 8 How Safe is the Safe Withdrawal Rate? Retirement Roadshow (Standard returns, 30 year term) 9 Outcomes Retirement Roadshow (20% Positive Return Yr 1 and Stochastic Returns in Years 2 30) 10 How Safe is the Safe Withdrawal Rate? Retirement Roadshow (-10% return Yr 1 and Stochastic Returns in Years 2 30) 11 How Safe is the Safe Withdrawal Rate? Retirement Roadshow Changes in circumstances Divorce? Ill health? Bereavement? Marriage? Retirement Roadshow 8850% 13 The chances of a 65 year old living to age: 8566%78% 7589%94% 9150% 9528%33% On average, people are living longer Retirement Roadshow Survival Distribution Curve Average Life Expectancy = 88 Source: Aegon CMI Mortality tables But averages hide individual variance Retirement Roadshow 15 Flexibility Security Cash Drawdown Secure Drawdown Annuity Balancing Flexibility & Security: are Hybrids the answer Retirement Roadshow Hybrids One path unlikely to meet individual needs Advice needs to be proactive Significant increase in consumer engagement Consumers need help Retirement Roadshow Case Study Colin has just reached state retirement age (65) Qualifies for full state pension of 6,029 Wants to cover basic income needs of 1,000 per month Now has a number of options to make up the 6,000 p.a. shortfall Retirement Roadshow Single Life, Level, No Guarantee Annuity 5,600 per 100,000 Case Study Retirement Roadshow Joint Life, 3% Escalating, No Guarantee Annuity 3,302 per 100,000 Case Study Retirement Roadshow Flexi-Access Drawdown 4,000 per 100,000 Case Study Retirement Roadshow Guaranteed Drawdown 4,250 per 100,000 Case Study Retirement Roadshow Cost of options for 6,000 p.a. 107,143 181,708 150,000 141,176 Single Life, Level, No Gtee Annuity Joint Life, 3% Escalating No Gtee Annuity Flexi-Access Drawdown Safe 4% withdrawal Guaranteed Drawdown Case Study Retirement Roadshow The Retirement Income Planner Retirement Roadshow The Retirement Income Planner Retirement Roadshow 1.Consider the options facing clients at retirement Annuity Drawdown Take the cash 2.Analyse the risks inherent in these options 3.The rise of the hybrid solution Learning Objectives Retirement Roadshowo.uk Questions Gavin Casey Distribution Director, Aegon Ireland Aegon is a brand name of Aegon Ireland plc. Aegon Ireland plc, registered office: 2nd Floor, IFSC House, Custom House Quay, Dublin 1, Ireland. Registered in Ireland (No ). Authorised by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. An Aegon company. 2014 Aegon Ireland plc 26
