Chancery Lane Research has warned that many retirement income tools used by advisers are based on institutional investment theory and may be poorly suited to private clients in drawdown.
The firm made the warning in its latest white paper, Retire Well 2025, published today (19 November).
It said traditional models such as Monte Carlo simulations and 60/40 allocations were originally designed for pension funds and large institutions, which operate with multiple cashflows, long time horizons and no sequencing risk.
By contrast, private retirees require predictable income, inflation resilience and the ability to withstand market shocks without risking capital depletion.
The report argues that many adviser planning tools rely on growth assumptions and theoretical projections, rather than real, historical income data.
Chancery Lane CEO Doug Brodie said: “Most investment guidelines offered to advisers hail from institutional investment firms, whose research is built for institutional clients with multiple cashflows and a 50-year horizon. Those models are not designed for private clients drawing income from a single pot.”
The research introduces the Projected Income Pension (PIP), a data-driven income framework tested with live client portfolios since 2007.
Unlike growth-based drawdown strategies, the PIP approach aims to deliver a monthly income using natural cashflows from investment trusts and fixed income, without relying on stock market growth or capital erosion.
Chancery Lane said PIP portfolios have not seen a fall in annual income in 17 years, including during the 2008 financial crisis, the 2020 pandemic and the 2022 inflation shock.
It claims this makes it potentially closer to an uninsured defined benefit-style pension, with more flexibility over capital.
Brodie added: “Our message for advisers is to prioritise reliable income and understand that sequence risk is coming. Fund managers run funds. They do not run clients.”
The paper also argues that Consumer Duty requirements will increase pressure on advisers to evidence income sustainability and fair value during retirement, making reliance on projected return models less defensible.
The report includes 25 years of historical results comparing natural income strategies with annuities, passive trackers and 60/40 models, as well as updated analysis on stochastic forecasting and the limitations of Monte Carlo planning.
