Former Nest and Smart Pension distribution head Paul Budgen is creating a guidance app-based solution designed to enable financial advisers to support clients with modest pension pots plan their retirement.
The proposition, called My Time, is a guidance-based decumulation tool that operates a four pot model for retirees, targeted at those with pots of between £30,000 and £250,000.
Advisers can earn £500 through the proposition, paid by My Time, through utilisation of the pensions advice allowance, says Budgen.
The core proposition puts 50 per cent of assets into a drawdown pot, 25 per cent into a later life pot, 10 per cent in rainy day funds and 15 per cent in a legacy fund. Users can dial these components up or down.
The drawdown pot targets zero at 79 years and 11 months, at which point the later life pot is used to buy an annuity.
Budgen projects that a user investing £100,000 will see income of £4,000 a year increasing at 3 per cent a year until age 80, followed by an annuity of £5,400 a year, assuming today’s yields and based on typical investment assumptions.
Charges are to be defined but there will be a flat annual management charge of between 70 and 90 basis points, dependent on strategy.
The project is co-founded by financial adviser Elliott Silk and has backing development that will see a closed beta version by Q1, 2024 and a minimum viable product by this time next year. Budgen left Smart Pension last September to take time exploring theological studies.
Budgen says My Time will enable advisers to retain smaller value clients for longer, therefore increasing their market value in the event they sell their business.
Budgen says: “We think that traditional income drawdown charges are likely to be around £5,000, which is challenging for someone with a £100,000 pot. The danger for advisers is that they try to advise clients for less than that under duress. Our four-pot model will enable advisers to offer clients with smaller pots a service that can guide them through a range of options, and that advisers can generate revenue from.”