Retirement Income Solution (RIS) video guide

Introduction

The 7IM Retirement Income Solution (RIS) provides a robust and repeatable approach to building and managing a bespoke and sustainable income strategy for your clients in retirement.

This video will show you how to use our online Retirement Income Solution modelling tool to create and implement your client income scenarios, and how to manage your clients’ plans at each review via our platform.

Creating a new plan

Once you have logged into our platform, go to the Retirement Services menu and then to Retirement Income Solution.

To begin, click Create New and then add in the client’s name.

If this client is already on our platform, their name will appear, and you can select them which will pull through their existing details. You will also be able to select which of their existing 7IM accounts you wish to include in the RIS plan.

If they are not on our platform, click New client which will allow you to enter all the details yourself.

Once you have added all the details and selected an adviser, click on Start new scenario. This will take you into our Retirement Income Solution portal.

From here, you can either create a Quick Plan or a Full Plan.

A Quick Plan enables you to enter basic levels of information (including the client’s risk profile, total investment amount, time horizon and income required) to start looking at income scenarios. This can be useful in the early stages of planning and can be converted into a full plan later.

A Full Plan goes into more detail by including the investment and income split between each wrapper, as well as the chosen model portfolio for each risk pot, and will lead to a more detailed report which you can then implement. Please note, you will always need to have a full plan in order go live.

Quick plan

Let’s look at a Quick Plan first.

The Retirement Income Solution can be used with a number of different investment providers, including 7IM, and this first section will show you which of the available investment providers you can choose from. If you want to use one of the other investment providers that are part of the Retirement Income Solution, please get in touch with us so that we can arrange access.

Having chosen your investment provider, you can then select:

• the client’s overall risk rating,
• the total amount of money that you want to allocate to the Retirement Income Solution,
• how many years you want the income to last; and
• the annual gross income amount required. This can either be entered as a monetary amount or a percentage amount. Please note that any monetary figure will automatically be converted into a percentage and rounded up to the nearest 0.1%.

You can also choose to build in some escalation to the income, either at a fixed rate or using long-term inflation rates. If you don’t want any escalation, please select zero.

As clients sometimes want varying levels of income during their retirement, you can use the Add variable income section to include these in the scenario planning. For example, you might want to have a higher level of income for the first few years before reducing to a lower level of income for the rest of the term. In which case, you can enter the long-term income requirement in the main income box above and then add the additional amount required for the first few years and how long for, in this variable income section.

Please note that if you have selected for income to be escalated, then this escalation will also be automatically applied to any variable income that is added in this section.

Finally, you can add in any other sources of income that the client has, or will have coming in, such as state pension or other pension income. You could also include any income that would be generated by a Secure Lifetime Income product within our SIPP.

Any amounts included here will reduce the overall amount needed to be withdrawn from the investments within the Retirement Income Solution and therefore increase the overall sustainability calculation of the plan.

Once you have completed this section, click Next.

In this screen, you can input your ongoing adviser fees, and it will also show the 7IM platform charges as a reminder. Finally, click Show results.

Plan results

This results page will replay the information you entered previously and the results of the modelling calculations that have taken place. It is worth renaming this scenario to something more client-friendly and to enable you to easily identify different scenarios if you choose to save multiple versions.

The results will include a sustainability calculation about the probability of there being money left at the end of the term. This is displayed as both a percentage figure and a more visual client-friendly dial graph.

We also display a range of potential outcomes based on various market conditions to help you with your planning and client conversations.

On the Portfolio tab, we display a high-level portfolio split between the various risk pots as well as the client’s overall risk rating.

There will always be two years of income allocated to cash and a further three years of income in a lower-risk, short-term pot. This is offset by an allocation to a higher-risk long-term pot. It is important to highlight that the combined allocation across all the pots will match the client’s risk profile.

From here, you can either choose to Save and close, which will enable you to then create different quick plan scenarios for this client, or click on Generate proposal report, which will allow you to edit this scenario and convert it into a Full Plan as we mentioned earlier. This is what we will look at next.

Full plan

The first section of the Full Plan is the same as the previous Quick Plan, so you scroll to the bottom and click Next. This screen is the first additional section where you can input the various tax wrappers or accounts that the client has that you want to include in the Retirement Income Solution.

Once you have clicked on Add Account, you can choose the wrappers you want to include.

Once all the accounts have been added, click Next to go to the second additional section about investments.

This screen allows you to select how much of the total income amount you want to take from each wrapper by entering the amount in this box and also which investments should be used for each risk pot - short, medium and long term.

The drop-down menus for each risk pot will contain the names of the model portfolios or funds of your chosen investment provider that have been allocated to that particular risk strategy.

Once you have entered the income amounts and selected the investments for each wrapper, click Next.

This fee page is the same as in the Quick Plan and will therefore display whatever you input previously, if you had started with a Quick Plan. Finally, click Show results.

The results page for the Full Plan is similar to the Quick Plan in that it includes the sustainability calculation and the high-level portfolio split. However, it also includes an additional Investments tab that shows a detailed breakdown of the amounts allocated to each investment within each wrapper as well as an overall strategic asset allocation of the portfolio.

You can always amend the investment splits used in each wrapper by clicking on the edit button in the Portfolio section and then entering the amounts you wish.

This Full Plan scenario is now ready to be created into a client-facing report by clicking the Generate Proposal Report button. Please be aware that you might need to switch off any pop-up blockers at this stage to allow the PDF report to open or be downloaded by your browser.

Proposal report

This report is designed to be client-facing and includes everything that you have just seen on screen when creating the full plan, including the all-important sustainability results summary on the first page as well as later on.

There is also a space in section 4 called Adviser Analysis where you can add your own text to be included with this report.

Activation & implementation

Once your client is happy to proceed with this Retirement Income Solution plan, you can click on the Submit scenario button to activate the plan.

You will then need to make sure that the various wrappers, sub-accounts, and investments detailed in the investment strategy section of the plan are implemented.

New client

For a new client who is not yet on our platform, you can use the information in the investment strategy section of the Retirement Income Solution plan to help you complete the client’s online application pack.

You will need to add the correct number of additional sub-accounts (normally an extra three) in the Wrapper section of the online application.

Then, in the Funding section, you can allocate the split of the transfers or the lump sum amount to each sub-accounts – D, J, K, & N.

And finally, in the Investing section, you can assign the relevant investments (e.g. model portfolio or cash) to each of the sub-accounts.

Existing client

For a client already on our platform, this will probably involve opening additional sub accounts (or dealing portfolios) for each wrapper. This is easily done online, and there is also a video in the Account Maintenance section of our Platform Help Centre that will show you how to do this.

We will then rename these dealing portfolios as “Cash”, “Short Term”, “Medium Term”, and “Long Term” so that it is clear which sub-account is being used for each risk pot and then matches the Retirement Income Solution strategy.

Once these have been opened, you will then need to ensure they have the right amount of assets in each one, in line with the plan. To do this, you can sell the existing assets and then move the subsequent cash into the new sub-accounts using our Cash Movements tool.

Once the money is in the right sub-accounts, you can invest this into the relevant investments for that particular sub-account. Typically, this will involve rebalancing each sub-account to the relevant model portfolio.

Illustrations

You can prepare an illustration for our Retirement Income Solution in the usual way by clicking on the Client Illustrations option in the Tools menu. You do all the usual steps for an illustration, except that once you have chosen the Savings or Pension option, you will be able to select a Retirement Income Solution version of the GIA, ISA, or 7IM SIPP. This will automatically include the additional annual charge associated with this product.

From there, you can complete the illustration as normal, selecting the investments listed in the plan and assigning the allocations to each one.

The review process

It is essential that every client using our Retirement Income Solution gets reviewed each year, and we have created a robust review process for these plans, which we will now go through.

In the Retirement Income Solution screen, click on the Active tab to see those clients who currently have an RIS plan.

The review date will automatically be set one year from when you first activated the plan. From this screen, you can change the review date to either bring it forward or push it back by up to six months.

You can also edit the plan to include other 7IM accounts that the client has on our platform that weren’t included in the original RIS plan.

To view the current RIS plan, click on the RIS reference number which will then open the RIS portal.

This screen will show the current portfolio value, sustainability calculation and the current value of each investment bucket.

The next step is to click on View details.

Here, you will be able to see the details of the original plan so you can see how things looked last year.

To review this plan, click on the orange Review plan button at the top.

This review screen recalculates the whole Retirement Income plan, including the Sustainability number, so you can discuss with your client whether they are comfortable with how things are progressing.

It also shows the current value of the plan along with the income that has been taken so far.

Importantly, it also compares the current value of the client’s medium-term pot (which is the one that matches their risk profile) against the value at the last review date (or start of the plan if this is the first review) to determine the course of action to take at this review.

If the value has risen, then the plan is said to be On Target, and therefore, the course of action will be to realign all the pots, restoring the two years’ worth of income in cash.

If the value has fallen since the last review, then the plan is said to be Not on Target, and therefore, there is no realignment, as the aim is to avoid selling assets at a loss. Instead, the income will continue to be withdrawn from the cash pot. This is why there is two years’ worth of income in cash, to allow a second-year buffer should it be needed.

Whatever the situation, you need to generate a review report to give to your client as part of the review process. This report will look similar to the original Retirement Income report and will include the revised sustainability calculation, the values, investment buckets, and the course of action to take as a result of the review.

Following the review with your client, there are a range of next steps you might take, depending on the situation.

You can change the plan altogether, either by adding in extra accounts or changing any of the original requirements. Clicking this button will take you back to the scenario planning stage and enable you to make the necessary changes. This effectively stops the original plan and starts a new one.

If the client’s plan is on target, then you can carry out the realignment.

By clicking on the Realign plan button at the bottom (which will be greyed out until you generate the review report), you’ll be able to see this screen, which is available to download as a document that shows the changes that you need to make to each bucket to realign this plan.

This will involve selling assets in one or more of the invested buckets and transferring the cash proceeds into the cash pot and possibly some of the other invested buckets. This can all be done online on our platform using the dealing screens and the cash movements tool.

If the client’s plan is not on target, and hence there is no realignment required, you would instead click the Use cash buffer button to confirm that this was the course of action agreed with the client. In this situation, the RIS plan moves to a quarterly review period, and the review date will reset to three months time.

At that next review, the same process that we have just run through will happen, and either a realignment will be required if the value has increased, or the review will be moved on another three months if the value is still down.

In the unlikely event that the client gets to the end of the two-year period and their medium-term pot is still below the last value, then action will need to be taken anyway, as there will be no more cash left to fund the client’s income. This is called a defensive realignment and will result in one year’s income being sold to cash from the various buckets.

For more details about the review process, please read our Technical Guide to the Retirement Income Solution, which you can download from our Literature Centre.