AJ Bell launches new retirement portfolio service

Investment platform AJ Bell has introduced a new solution to help financial advisers manage clients taking an income in retirement.

The AJ Bell Retirement Portfolio Service is designed to be relevant to any clients requiring a sustainable income in later life and is available via a SIPP, ISA or general investment account.

The solution offers advisers a fully managed, centralised retirement proposition via the AJ Bell Investcentre platform. It combines four strategies designed to prolong the longevity of portfolios in decumulation, whilst minimising sequencing risk – which can be particularly detrimental if investments are sold at a loss in the early years of retirement and can impair the longevity of the pension pot.

The new service promotes the ‘4% rule’, which works on the premise that if someone withdraws 4% of their retirement fund value in the first year and then adjusts subsequent withdrawals for inflation, they should avoid running out of money for 30 years.

A client’s investments get split into three ‘buckets’ – 45% in the AJ Bell income and growth fund, 45% in the AJ Bell income fund and 10% in cash. The AJ Bell funds are widely diversified multi-asset funds investing in passive ETFs and active funds, and both target an annual yield of 4%.

The cash bucket is used to meet the client’s income requirements as agreed with their financial adviser. The annual 4% yield produced by the two funds is paid into the cash account, replenishing it over time and reducing the need to sell down investments at the wrong time, therefore acting as a ‘natural defence’ against sequencing risk.

AJ Bell’s annual management charge for both the funds is 0.15%, with the ongoing charges figure capped at 1%. AJ Bell’s normal platform charge will apply to the fund holdings (but not the cash reserve), scaling down from a maximum of 0.2% depending on portfolio size.

AJ Bell chief investment officer Kevin Doran commented: “Given the popularity of the pension freedoms there is a real need for products and services that help advisers deliver an effective retirement proposition. With income drawdown now the most popular retirement income option, advisers and their clients are having to get to grips with managing portfolios in the withdrawal phase and the specific challenge of sequencing risk.”

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