LV= RETIREMENT PATHFINDER USER GUIDE:

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1 LV= RETIREMENT PATHFINDER USER GUIDE: The LV= retirement pathfinder tool can be used to help demonstrate that the level of income recommended to your client s will be sustainable over the long term. This guide is designed to take you through the process of creating a sustainability report and highlight common errors raised by compliance. Please use the Intrinsic version of the LV= report as the growth rates have been mapped to the Intrinsic risk profiles. Web Address: 1. HOW TO CREATE A NEW CASE: 1) Select: Tools 2) Select: Launch LV= Retirement Pathfinder 3) Select: Use the LV= Retirement Pathfinder: You will be asked to log in if not already. 1 P a g e

2 4) Select: Create a new client record 5) Complete the following boxes on the first page Post Code affects predicted life expectancy Affects tax calculation for year 1 Include the value of all client pension funds. Do not include investments. 2 P a g e

3 2. OTHER INCOME: The client s pension may not be the only source of income they have in retirement. You should include other income sources as this will reduce the amount of income they take from drawdown, increasing sustainability. It is best to select the other income box rather than typing a figure directly as this will allow you to select start/end dates. 1) If the client plans to work part-time until they fully retire then this should be added as other income. The start date will be their current age and the end will be the age they will fully retire. 2) If the recommendation includes guaranteed income from a spouse, this can be added but take care with the start date. For example, if the spouse has a DB pension which will be paid at age 65 but they are 4 years younger, this wouldn t be paid until the client is 69. They may still be working during this time period so include this income. 3) Rental Income can be added (Leave end date blank if the client does not plan to sell) Do not add state pension to this section as the system will add this in separately. Investments should not be added in unless they are guaranteed. 3 P a g e

4 3. REQUIRED INCOME IN RETIREMENT: Through discussions with your client you should have an idea of how much income they will need in retirement. The client may not know exactly how much they need but you can use their current expenditure as a starting point. As you will have recorded their expenditure within the fact find, there is no need to complete the budget planner. You can simply enter the required income which should be Gross. Income need should include additional expenditure such as holidays, meals out etc rather than what they spend on household bills. A lower income need in retirement is expected but compliance will challenge any significant decreases in income. For example, a client is 65 and wants to retire now. Their current expenditure is 45k p.a but the LV= report shows that they only need 18k p.a. There may be genuine reasons for the decrease (e.g. debt repayment) but this should be clearly recorded within the suitability report. 4. HEALTH QUESTIONS Ensure that you obtain sufficient detail during the fact find process to enable you to complete the following section. The health questions will adjust the client s life expectancy and will help to support the level of income taken. Click submit once this is complete. 4 P a g e

5 5. CHOOSING A SCENARIO: Flexible Income (Drawdown) should be selected. This will produce a sustainability report based on the input from the first page of the tool. Guaranteed income options can also be added if you wanted to compare but this is not a requirement. 6. ADJUSTING THE RETIREMENT INCOME BUILDER: After selecting Flexible Income (Drawdown) you will be presented with a graph of the inputs you have used. The summary section will need to be updated before saving the report which will be covered in the following section. 5 P a g e

6 7. RISK RATING Select Risk Rating to expand the box. This will default to Risk Averse, Medium growth and 1.6% charges and will need to be updated as follows: 1) Risk Rating - change to agreed ATR. 2) Growth Assumption leave as medium. Low can be used if you want to show a worst case scenario but compliance would not expect High to be used as this is the least likely scenario. 3) Wrapper & Investment Charges: This figure can be found in the illustration of your recommendation and will include the fund and provider charge. Charges can be changed in 0.05% intervals so round up if you cannot get the figure exact. Do not include advice charges as this is covered separately. 8. ADVISER CHARGES Select Adviser Charges to expand the box. This will default to an Initial charge of 3% and an ongoing charge of 0%. This will need to be updated to match your charging rates. Select if you want to input a specific initial charge. 6 P a g e

7 9. TAX FREE CASH Select Initial Cash to adjust the level of tax free cash (TFC). The system assumes that 25% TFC will be taken. If this matches your client s objective then you can leave as is. If not, amend to match. Note: TFC can only be altered by a whole percentage point. E.g. The client wants to take 28,500 from a pension fund of 300,000 which is 9.5%. The system will round up to the nearest whole percentage point which is 10% in this example. As below, 30,000 is shown even though the client s actual objective is to take 28, STATE PENSION Select State Pension to manually adjust the state pension figure used. The default figure is currently 8,094. If you have a BR19 form then you can update to the correct figure. Compliance Note: If sustainability is highly reliant upon state pension, it is best practice to request a BR19 form as the client may receive less than the default 8,094. State pension start date is based on the client s date of birth. Unless the client plans to defer taking their state pension you do not need to update this section. 7 P a g e

8 11. CASH LUMP SUM If the client plans to take additional lump sums then this can be added as a separate input. For example, the client may take their tax free cash at age 60 and an additional lump sum for a holiday when they fully retire at 65. Select + Add Cash Lump Sum which will add the lump sum input to the summary panel on the left. Select Cash Lump Sum from the summary and input the age that the client wishes to take this lump sum. The Amount figure needs to be gross. If the client wants 16k then you should input 20k if they are a basic rate tax payer. 8 P a g e

9 12. IS THE INCOME SUSTAINABLE? Once you have amended the summary table and added in any additional lump sums you should check to see whether the income taken will be sustainable over the long term. The graph will show a yellow dotted line which shows the client s average expected life expectancy and a blue dotted line which shows above average life expectancy. If there is no red dotted line showing on the graph then this indicates that the income will be sustainable past the age of 100 and there is no issue with the level of income selected. Compliance Note: If a red dotted line shows on the graph, this is the age which the funds are expected to run out. This is not necessarily an issue but if the red line falls before the blue line then compliance will challenge. This is an indicator that the pension would be depleted if the client lives beyond average. If this occurs, you should discuss with your client whether they have considered taking less income or delaying retirement to demonstrate sustainability. 9 P a g e

10 12. SAVING YOUR REPORT 1) Select Save when you have finished editing the report 2) A box will then appear titled Your Saved Solutions. Select this box. 3) Select Compare Solutions & Generate Report from the dropdown ) Select Income View so that the graph is added to the report. 5) Select Create Client Report. Advisor name, firm name and company logo can be added at this stage to personalise the report. Click Create PDF report when finished and save the PDF to your client file P a g e