Income sustainability scores updated - are your clients still on track?

14 November 2019



Our drawdown governance service has been designed to help you monitor the sustainability of your clients' income and see when things are heading off track.

Every quarter, our drawdown governance service calculates a new income sustainability score for your clients, based on what's happening in the market.

The income sustainability scores for Q3 2019 have now gone live. Here’s an update on what’s changed.

What’s changed?

The latest update to our drawdown governance service shows a greater impact on income sustainability scores due to current market conditions.

In previous updates, fund performance and individual income levels acted as the primary driver for changes to your clients’ sustainability scores. This quarter, changes to the market assumptions provided by Moody’s Analytics has had the biggest impact.

This is because the effect of the yield curve inversion in early August on the asset return assumptions that support the sustainability calculations are impacting the outputs.

Inversion generally points towards a recession in the near to mid-term. In August, this expected weaker global growth was priced into the market and we saw sharp declines with some American indices posting the largest single day losses in years.

How does this impact the drawdown governance service?

Moody’s updates take a forward looking approach on asset returns and volatility.

This quarter, the expected returns on cash and bonds have decreased as expectations of a UK rate cut, actual US and Eurozone rate cuts and further Eurozone quantitative easing were announced.

Alongside this, UK equity volatility assumptions are modestly up, consistent with Brexit uncertainty, a weaker global economy and international trade and political tensions. All in all, this leads to a lower expectation of growth for our customers shown through lower sustainability scores across the service.

The value of the drawdown governance service is its ability to show the impact of not just client income levels, but also fund performance and current market conditions on income sustainability scores.

This means you can adjust your clients’ income levels to reflect the wider economic environment and ensure they maximise the likelihood of sustaining their income throughout retirement or until they buy an annuity.

What’s our houseview on sustainable income?

In light of the current view from Moody’s, we’ve taken the decision to adjust our houseview on what currently represents a sustainable income over a 25 year period.

Our current view is that a 3.5% withdrawal rate is highly sustainable.

Until now, our view was that 4% of initial savings would be highly sustainable over 25 years for those starting to take income from their retirement savings. However, given the current outlook we’re lowering this to 3.5%.

The income table below shows how this small change to withdrawal rates over 25
years increases the sustainability score by 13% when investing in GRIP 3.

  Income %
15 100% 100% 100% 100% 100% 100% 99% 93% 83%
20 100% 100% 100% 99% 97% 88% 72% 49% 25%
25 100% 100% 99% 94% 81% 58% 33% 14% 5%
30 100% 99% 95% 81% 58% 32% 13% 5% 1%
35 100% 97% 86% 64% 38% 17% 6% 1% 0%

All values calculated using a 1% AMC and using Governed Retirement Income Portfolio 3.

Highly Sustainable 85% - 100%
Quite Sustainable 75% - 84%
Barely Sustainable 50% - 74%
Not Sustainable 0 - 49%

This highlights how marginal changes to income levels can help to increase confidence that a client’s retirement savings are going to last. This withdrawal rate includes the impact of a 1% annual management charge.

The positives

Yield curve inversion, lower expected returns and a poorer global growth outlook: this all sounds very doom and gloom - so what are the positives to focus on?

Mainly, this is the resilience of our Governed Retirement Income Portfolios (GRIPs).

As interest rates fell over 2019 and a ‘lower for longer’ view is taken, GRIPs exposure to fixed income has proven valuable with falling rates helping to drive significant performance year to date. This reflects the expertise of Royal London Asset Management’s fixed income research teams who are continually recognised across the industry as being one of the best around, winning Fixed Income Manager of the Year at the recent financial news asset management awards.

Across equities, it can be hard to remember we’re still in a bull market as volatility continues to rear its head. Performance year to date has been strong but never before has it been so painful to make money!

Our tactical changes continue to add value, taking advantage of shorter term market conditions and greater exposure to high yielding assets within the GRIPs helps drive equity like performance with lower overall volatility.

Our GRIP proposition continues to stand out from the crowd delivering consistent performance across volatile periods to help support regular withdrawals.

You can use our drawdown governance service to discuss the suitability of clients’ current income plans and investments in light of continually evolving market conditions.

Find out more

Log in to our drawdown governance service now to see if your clients’ income sustainability scores have changed. 

If you don’t already use the service, visit the drawdown governance service webpage to find out how it can help you track, discuss and manage the ongoing sustainability of your clients’ income.


This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit

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.