Critical yield calculators
A critical yield is one of the key factors in deciding on the suitability of drawdown both at the outset and throughout the review process. It assumes that an annuity will be purchased at a certain point in the future. If the solution you recommended to your client still involves future annuitisation, then the critical yield calculation will still play a vital role when considering if the income level being taken is sustainable in the long term.
Example critical yield calculator show/hide
This calculator illustrates example critical yields for specific scenarios that you can select. These are based on an assumption that your client qualifies for a mild, moderate or severe enhancement.
To find out more about critical yields and the benefits an annuity may have for your client, please contact your dedicated Account Manager or email: email@example.com
Personalised critical yield calculator show/hide
The Personalised Critical Yield Calculator will give you an indication of what your client's critical yield might be. This should include the impact of your client's health conditions.
Please note that before you use the Personalised Critical Yield Calculator, you will need to obtain a relevant 'Guaranteed Income for Life' quote, either from your chosen quote portal or from us, and that the accuracy of the yield we provide will be dependent on the accuracy of the quote you obtain.
Using the calculator
Follow these 3 steps:
Step 1 - Put your client's initial 'Guaranteed Income for Life' figure, age, and fund value into the 'Type A Critical Yield' box.
To get an accurate 'Guaranteed Income for Life' quote, go to your chosen portal and insert the necessary medical information, or just ring us with your client's details and we will return an accurate quote for you to input as their initial income.
This is the benchmark for your drawdown review – i.e. the income that your client could receive if they bought a 'Guaranteed Income For Life' now.
Step 2 - Next, you need to put in an assumed age at annuitisation, for example age 85.
You're looking for the same level of income as now, so to get an accurate figure we need to know what fund size is required to support this income at the chosen age. In order to calculate the fund size you need to request a second quote for this later age, assuming the client has the same health conditions.
For example, if your initial income is £5,000, what fund size is required to support this as an income level at age 85? We can either calculate this for you, or you can use the target income facility on your chosen quote portal. This calculation would be based on the rate at that time, and if these were to change it would impact the yield that the personalised critical yield calculator returns.
Step 3 - Finally, input the initial and ongoing adviser charges and the amount of any fund related annual management charge, as these charges will affect the calculation.
Add the chosen income level and then use the target income quote facility at the later age, including the health conditions to calculate a 'Type B Critical Yield' figure.
This personalised critical yield calculator will perform the maths for you – you just need your client's accurate starting rate of income and a target income quote to give you the required fund value at the chosen age of annuitisation.
Once your client has a better understanding of their retirement income, they can start to consider all their options. We offer a range of additional tools and calculators to help you find the right retirement solutions for your clients.