Brexit leaves drawdown clients 'particularly vulnerable'

As drawdown is "particularly vulnerable" to lower prospective yields and higher market volatility, eValue says that additional monthly volatility of 3% is broadly equivalent to a loss of 1% p.a. in the return on investments.

Bruce Moss, Strategy Director of eValue, commented: “Negative pound cost averaging, combined with lower prospective returns, means advisers should review their clients’ drawdown plans urgently. This is particularly necessary for those clients who are maximising their withdrawals in the early years of retirement. Without the timely intervention of an adviser, these retirees may find that in later life their income is substantially lower than they would have wished."

In response, eValue has made a number of changes to its optimised model portfolios, including reducing the floor on UK government bond yields to -1.0% (previously set at 0%) and removing restrictions applied to investment in developed overseas equity markets .

It has also removed restrictions on quarter on quarter changes to UK commercial property, which is designed to prevent costly switching of property assets.

Moss added: “Because investors have a preference for assets in their home country, our asset allocations have had constraints on the amount that can be invested in overseas markets. As a result of the negative effect of Brexit on prospective UK asset returns, we have taken the decision to relax these constraints, so that investors following our risk rated asset allocations can benefit from the potentially higher returns in overseas markets – particularly developed country equity markets like the US.”