The ‘Essential current asset adequacy’ metric shows the percentage of assets held compared to the assets needed over the client’s life plan.
We backsolve to work out the amount of assets they need to have to meet their essential expenses with 95% probability and compare that to how much they already have.
Any guaranteed income the client has will be deducted from the essential expenses, so the assets will need to make up the shortfall.
An example is:
The client is 66 and has essential expenses of £20,000 and has guaranteed income of £11,541. Therefore there is a £8,459 shortfall.
The Asset Adequacy calculation will look at the amount of assets needed to meet this shortfall until the end of the plan and compare with how much they actually have.
