Building on a five-year track record: evolving our Governed Retirement Income Portfolios (GRIPs)

18 October 2017
Building on our five-year track record, we’re making changes to the strategic asset allocation of our GRIPs to improve diversification and make the GRIPs more suitable for more of our drawdown customers.

The GRIPs were launched before Pensions Freedoms and were originally designed for drawdown customers who would eventually purchase an annuity. Now that there are fewer customers buying an annuity, we have tweaked our GRIPs to also help customers who choose drawdown for life.  

A broader mix of assets also means the GRIPs should be more resilient to market shocks, and can benefit further from Royal London Asset Management’s (RLAM) increased multi asset capability. 

Further diversification

The changes include allocations to our new wider range of asset classes that have recently been introduced to our Governed Portfolios- in particular allocations to commodities, gilts and absolute return strategies including cash.  

What’s more, we’ll continue to apply a tactical overlay to the portfolios which is managed by Trevor Greetham, Head of Multi Asset at RLAM, with the aim of adding value over and above the strategic asset allocation by making short-term tweaks to the investment mix. 

Key changes

  • Commodities – introduction of an equal commodities allocation to provide additional diversification and some resilience to unexpected inflation shocks
  • HY Bonds - a 50:50 mix of global and UK high yield bonds to provide better diversification
  • Broader fixed interest exposure – we are adopting an equal weighting across high yield, gilts, index linked and corporate bonds to provide stronger diversification and some additional resilience during stress periods
  • Absolute Return (including cash) – new asset class allocation further reducing our exposure to index linked and provides enhanced capital preservation and liquidity characteristics but with higher risk/return characteristics than pure cash

New risk metrics

We are also introducing new risk metrics which focus on income sustainability and monitor the probability of each GRIP sustaining customers’ retirement income. Sequencing risk remains a valid concern for any drawdown customer, and we believe this concern is best tackled by actively managing sustainability with regular adviser reviews throughout the retirement journey using our Drawdown Governance Service (DGS).

Governance in action

These updates have been reviewed and approved by our Investment Advisory Committee (IAC), and is an example of our ongoing investment governance intended to deliver better outcomes for customers.

When are the changes taking place?

The new strategic asset allocations were made in mid-October. Tactical asset allocations will be shown on the relevant factsheet as and when the changes are made.

Further information

Please speak to your usual Royal London contact about the changes.

Last updated: 18 Oct 2017

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.