Switching on income is the moment a client should be re-segmented

Plenty of firms have a centralised retirement proposition. Fewer can point to the moment a client actually enters it.

That gap is the subject of this piece. A CRP can be well written, reviewed by the investment committee and filed with the rest of the proposition documents, and still never touch the client it was written for, because nothing in the firm's process moves a client across from the accumulation side when they start drawing income.

Why the risk score can't do the job

Our CRP and decumulation guide opens with a worked example I'd recommend reading in full. A 63 year old with a £640,000 pension wants £36,000 a year from her SIPP to bridge the gap until her state pension and defined benefit income start. On a standard questionnaire she lands in the same risk band as a 45 year old who is still saving.

Same score. Opposite exposure.

The saver benefits from a fall in markets because they're buying. The retiree is selling units to fund her income, so a fall early in drawdown takes capital that later recoveries can't restore. The guide makes the point that average returns over a period can be identical while the outcomes for someone withdrawing income are very different, depending on the order those returns arrive in. A risk profiler measures the client's tolerance. It doesn't measure the direction of their cash flows, and in drawdown that is the thing that matters most.

What the trigger should record

So the CRP needs a trigger. When a client first takes income, or tells you they're about to, the file should show a deliberate step rather than a change of fund list at the next rebalance. I'd expect it to record:

• The new segment. Which decumulation segment the client now sits in, and why. The CIP segment they came from is no longer the reference point.
• The withdrawal approach. The guide describes several that UK firms use, including bucketing, total return drawdown with rules for cutting withdrawals after falls, an annuity floor with flexible drawdown on top, and natural yield. The file should say which one applies and what the firm considered and rejected.
• The annuity question. Whether an annuity, or part annuitisation, was considered, and the reasoning if it wasn't recommended.
• The sustainability test. The cash flow modelling run at the start, including the stress scenarios, and the withdrawal rate the client chose having seen them.
• The review cadence. The guide notes that six monthly reviews in the early drawdown years are increasingly seen as the supervisory expectation, with annual reviews once circumstances settle. The CRP should state its own cadence and the file should show the client is on it.

None of that is new work. Most of it already happens somewhere. The difference is that it happens because the proposition requires it, at a known point, and the evidence sits in one place.

Longevity turns a planning choice into a proposition choice

The guide cites ONS data showing a 65 year old man has roughly a one in four chance of reaching 95, and a 65 year old woman roughly one in three. That changes what a sensible planning horizon looks like, and I don't think it should be left to each adviser to pick an age on the day. The CRP should say what horizon the firm plans to by default and what stress test it runs beyond it. Then the transition meeting applies that default, and any departure from it is written down with a reason.

Where the Consumer Duty fits

Clients in drawdown are in the phase where harm from poor advice is hardest to reverse. Running short of money at 85 isn't something a later review can fix. The Consumer Duty's cross-cutting rule on avoiding foreseeable harm applies to every client, but the consequences in drawdown are more lopsided, which is why I'd want the transition itself to be visible in the firm's outcomes monitoring. A useful measure is simple: of the clients who started taking income in the last year, how many had a documented re-segmentation within a set number of weeks of the first withdrawal?

A test you can run this month

Pull the list of clients currently taking regular withdrawals. For each one, check which investment solution they sit in and whether it belongs to the decumulation side of the proposition. Then look for the file note that moved them there.

If some of them are still in an accumulation portfolio chosen years ago with no transition record, the gap sits in the handover. And the handover is the easiest part of a CRP to fix, because it only needs a rule about when it happens and a checklist of what gets written down.