What if I have other sources of income?

As the main income source, the typical portfolios outlined in the risk descriptions would deliver an appropriate level of risk for your client’s income. If they have other sources of secure income - for example, if your client also receives a State benefit, DB income or income from an annuity - they might be able to accept more risk in their portfolio in return for a higher income or some freed capital, while remaining within their overall income risk budget.

Each risk profile corresponds to a portfolio with a particular “income at risk” (IaR) measure. This is the size of a drop in the fund's sustainable income with a 1 in 4 chance after 3 years. For example, an IaR of 4% means a 1-in-4 chance that a fund’s £1,000 sustainable income for life would reduce after 3 years to less than £960.

If your client has other secure income, they could invest in a portfolio or fund with a higher IaR: an IaR equal to their risk profile’s IaR increased by the proportion of the withdrawals to the guaranteed income.

For example, if your client’s attitude to income risk is assessed as Risk profile 2 out of 10 (cautious), the typical portfolio has a 4% IaR. If your client wishes to withdraw a sustainable level of income for life of £10,000 from their pot and has other guaranteed income of £20,000, an overall IaR of 4% can be achieved by investing in a portfolio with income at risk of 12% (i.e. 4% x ( 1 + 20,000 / 10,000 ) ), which corresponds to a Risk Profile 7 out of 10 portfolios (low end of moderate-to-adventurous).